Once again the ABC Consumer Comfort index indicates that it is leaps and bounds more relevant than the ADP Private Payroll number. With increasingly less relevant confidence indicators out of UMichigan and the Conference Board, which lately only seem to "poll" 20 people with a $1MM+ Schwab trading account, it is worth noting what a true polling index says about the economy. And it isn't pretty: "Soaring gasoline prices slammed consumer sentiment into reverse this week, threatening the slow recovery in economic views that’s been under way. With gas now at record high for a February in Energy Department data back to 1990, the weekly Consumer Comfort Index dropped by an unusually steep 5 points to -46 on its scale of -100 to +100. It’s dropped that far only 36 times in more than 1,300 weeks of ongoing polling since late 1985; this shift erases an equally unusual 5-point gain in early January...After reaching -40 Jan. 9, the CCI is now at its low for the year, and its lowest since Nov. 21. It averaged -46 in 2010 and -48 in 2009; those compare with a lifetime average of -14 and a best-year +29 in 2000. Its single best week was +38 in January 2000; its worst, -54 in December 2008 and again in January 2009." So strange: unlike with stocks, where inflation is somehow supposed to raise confidence, inflation for the people somehow leads to a near record plunge in confidence. But who are we to believe in this centrally planned economy when every single data point is now fit to be discarded as nothing more than evidence of propaganda.
Charting the CCI:
And some more from ABC:
It’s likely no coincidence that the change in sentiment follows the federal government’s report yesterday that gas has jumped to an average $3.13 a gallon, up steadily from $2.74 six months ago, $2.65 a year ago and $1.89 two years ago this month.
The portent is not a good one. Gas prices tend to drop in winter, when demand is down, and rise in summer, when more Americans hit the road. Gas last approached this wintertime level in February 2008 – on its way to a record high of $4.11 the following July.
A repeat could be devastating to consumer sentiment.
We hope the Economy Ph.D.s from the "other two" indices read the following paragraph, as they seem to still be completely clueless about how the economy actually works:
Although the CCI and gas prices don’t always move in tandem, they’ve correlated significantly, at -.46, since 1990 (after detrending for time) – meaning that as gas prices go up, confidence tends to decline. And that relationship strengthens when fuel prices are rising: From February 2007 to July 2008, as gas soared from $2.19 to $4.11, the CCI tanked from -1 to –41; the two correlated at a remarkable -.84.
That relationship suggests that confidence would be in a better place now were gas prices not rising – with this week’s CCI a warning siren for the slow, tentative recovery of late.
The following explains the Index' methodology:
The index, produced by Langer Research Associates, is based on Americans’ ratings of their personal finances, the buying climate and the national economy. Positive ratings of the buying climate and the economy took 3-point hits this week; 43 percent rate their finances positively and 25 percent call it a good time to buy, compared with long-term averages of 56 and 37 percent, respectively. Just 13 percent rate the national economy positively, 24 points below its average.
Among groups, the index dropped most sharply this week among singles, young adults – and among the wealthiest Americans, sliding into the negative zone in this customarily more positive group. They may be regretting those gas-guzzling SUVs.