Tags: consumer | confidence | recession | indicator

Consumer Confidence as a Contrarian Indicator

By    |   Tuesday, 01 Jul 2014 07:56 AM

Over the years, I have discussed a number of sentiment indicators for the overall market and for specific commodities and so forth.

One indicator that I haven't covered, or at least if I did, it was so long ago that I don't remember, is the Consumer Confidence report that is published by the Conference Board on a monthly basis.

Because the report covers consumer confidence, it is a sentiment indicator and it measures the public's view of the economy.

The most recent report was released last week and it came in at a reading of 85.2, which is the highest reading since January 2008 — just as the economy was at the beginning of the Great Recession. This was after a peak reading of 111.2 in February 2007.

In order to support the case of Consumer Confidence as a contrarian indicator, let's look at historical highs and lows.

The all-time high reading was 144.7, which was hit in January and May of 2000, just before the recession of the early 2000s.

The important lows during the last 20 years came in March 2003 (61.4) and February 2009 (25.3). Both of these readings came at the end of bear markets.

When you combine the six-year high in consumer confidence with the final adjustment to the first-quarter GDP report showing a contraction of 2.9 percent for the U.S. economy, you can understand why I am bringing up consumer confidence as a contrarian indicator.

There is no indication that the indicator has peaked yet, but it is certainly something we want to keep an eye on with confidence climbing and GDP falling.

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Over the years, I have discussed a number of sentiment indicators for the overall market and for specific commodities and so forth.
consumer, confidence, recession, indicator
268
2014-56-01
Tuesday, 01 Jul 2014 07:56 AM
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