Wednesday, 28 March 2012

Never let telling the time get in the way of a good story

A few of today's headlines read “Consumer confidence index drags down market mood” suggesting the modest fall in the Conference Board Consumer Confidence index from 71.6 to 70.2 might have been behind the sell off in US equities yesterday. I would think it unlikely for two reasons:
  • First, although the level fell slightly, the result was very slightly above the consensus forecasts and should therefore be taken as a positive sign for markets.
  • More importantly the index was released at 3pm our time whereas the sell off occurred between from 8pm to 9pm. Famously fidgety traders do not take five hours to digest a confidence survey.
Source: ConferenceBoard/Datastream

If they had they would realise the headline index is within a whisker of its post-Lehman high and the previous month was revised upwards.The underlying indices are also very supportive of the markets' main points of focus: the markets for jobs and for houses.

Perhaps most eye-catching has been the bounce in the “plans to buy a home within the next six months” sub index. This has now averaged just over 4.6% since the start of 2011 – the strongest indications of intention to buy since the survey began. Intentions to buy a car are also at elevated levels – despite fears.

The percentage of respondents believing jobs are plentiful continues to rise to its highest post-Lehman level. It is fair to note that the number of respondents believing jobs are hard to find ticked up slightly but was certainly consistent with a continuing decline towards post-Lehman lows.

Source: ConferenceBoard/Datastream

Never let maths get in the way of a good survey…

The Conference Board is just a survey and so it tells us what people think not necessarily what will happen. An example of this comes from the expectations for interest rates question. Back in 2007, with rates at 5.25% less than 10% of respondents felt interest rates were likely to fall. The latest survey tells us 16% of those questioned believe rates will fall – despite them being at a historic low of 0.25%. Possible, but unlikely!
Source: ConferenceBoard/Datastream

GUY FOSTER

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