The Bloomberg Consumer Comfort Index
The Bloomberg Consumer Comfort Index is a future-looking index that gives Wall Street an idea about how confident consumers are in regards to the future of the economy. This information is also very important because consumer confidence in the economy determines the ratio of saving and spending in a household budget.
If the index is declining, consumers may be worried about higher unemployment or increases in inflation that are higher than wage increases. This may force them to save more and spend less, which is a bad sign for any company in the SPDR S&P Retail ETF (XRT). Let’s have a look at how the index has performed since 2010.
The recent state of the index
The Bloomberg Consumer Comfort Index rose to 40.7 in the week ended August 9, 2015. It increased 0.99% from the week before and 10.5% on a YoY (year-over-year) basis. This figure is good news for department stores like Macy’s (M) and Sears (SHLD), which have been seen struggling in the recent earnings season. The apparel sub-sector also sees this as a positive sign. This sub-sector includes retailers like L Brand (LB) and Urban Outfitters (URBN).
If consumer confidence stays strong, the back-to-school season may boost retail sales even further. However, it is too early to reach a conclusion about the direction of consumer confidence, as the world economy has been quite volatile recently and we could see these numbers sway in any direction in the future.