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Chart of the Day: US consumer confidence

We can look at the likes of Google Trends and see that there’s been a spike in searched articles for the word recession. So, it’s very much on the radar. A lot of this has to do with the inversion of the US Treasury yield curve, with 10-year Treasurys now trading 5bp below two-year Treasurys.

White line – US consumer confidence. Red line – S&P 500. Red-shaded area – periods when the US has been in recession.
White line – US consumer confidence. Red line – S&P 500. Red-shaded area – periods when the US has been in recession.
Source: Bloomberg

While we see increasing stress in global economics, notably in trade volumes, planned investment, and manufacturing, we’re yet to see it play out in the labour market and various consumer surveys.

Of course, these are usually the economic indicators that are last to roll over as we head into a recession.

When the consumer starts to be truly impacted by the economic landscape around them, we can hold greater certainty of a real contraction in economic activity, especially in countries like the US, where consumption is such a large contributor to GDP.

In the chart above, we can see the overnight release of the US Conference Board consumer confidence (August) survey, which printed a far-better-than-expected 135.1, versus the consensus of 129. As we can see, when this survey does turn lower, it isn’t only a solid indicator of an impending recession — it’s also of a decent drawdown in the S&P 500.

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