After an impressive two-month rebound, the Conference Board’s consumer confidence index fell slightly back in January. The headline index dropped from 64.8 to 61.1, a relatively small correction as the index rose from 40.9 to 64.8 over the previous two months. The consensus was however looking for a further improvement in consumer confidence to 68.0. The details show that consumers became more pessimistic about the present situation (38.4 from 46.5), while the expectations index dropped only marginally (76.2 from 77.0). The labour market differential reversed its December gain, falling from -35.0 to -37.4. The decline looks substantial at first sight, but the Confidence Board’s consumer confidence index is usually volatile. We are therefore not surprised to see a limited correction after the impressive rebound over the previous months. There is no reason to worry about it.
In January, the Chicago PMI dropped for a second straight month. The headline index fell from 62.2 to 60.2, while an increase to 63.0 was expected. The slightly weaker sentiment is confirmed by the details as production (63.8 from 64.9), new orders (63.6 from 67.1), order backlog (48.3 from 57.3), inventories (51.6 from 52.0) and employment (54.7 from 59.2) all weakened from the previous month, while only supplier deliveries picked up (61.5 from 56.6). The prices paid index eased slightly, from 61.5 to 56.6. The Chicago PMI is already moving sideways for about 8 months at lofty levels and while the index dropped for two consecutive months it doesn’t appear as a trend. The declines were relatively small and the Chicago PMI showed recently little correlation with the other regional business confidence indicators. Therefore we believe that we shouldn’t draw strong conclusions from it.