US consumer confidence index
Previously in this series, we discussed how June’s jobs data failed to cheer automakers. In this part of the series, we’ll take a look at the recent trend in the US consumer confidence index. The data are compiled by University of Michigan and Thomson Reuters and reported monthly. The Survey Research Center conducts the underlying survey, which consists of at least 500 telephone interviews involving a cross section of consumers in the United States (SPY).
Consumer confidence rises
The chart above shows the latest trend in the US consumer confidence index. As you can see, the index has been on an uptrend, hitting 96.1 in June. This is the second-highest reading since 2007. This appears to be the seventh straight month when the consumer confidence index has been above 90.
Positive for the automobile industry
A higher consumer confidence index bodes well for US vehicle sales. An increase in the US consumer confidence index is one of the reasons behind the uptrend in vehicle sales. Analysts expect US vehicle sales to exceed 17 million this year—the highest in a decade.
General Motors (GM) and Ford (F) get more than 60% of their revenues from the North American market. North America is the most important market for Honda (HMC) also, contributing ~45% of its revenues. An increase in the US consumer confidence index is positive for these companies.
Automobile companies are also affected by the prevailing interest rates on new auto loans. We’ll discuss this effect in detail in the next part of this series.