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ChartBrief 86 - The rise of consumer sentiment

We decided to take a closer look at a seldom talked about indicator, the Ipsos Consumer Sentiment indexes (available exclusively through Thomson Reuters - we use Datastream). The indexes are available for 24 countries, and they provide a common basis for tracking consumer sentiment across many of the world's major economies. We found a couple of interesting trends worth highlighting. The first one is the composite view for developed and emerging economies (composite based on IMF GDP PPP weights). It shows both developed and emerging economies' consumer sentiment looking a lot stronger, and with developed economies making new highs.

Interestingly, the EM composite reading is persistently higher than DM (skewed up by China and India). But probably most interesting is the chart of the global composite consumer sentiment indicator vs global equities. There appears to be a fairly strong link between them. This makes sense for a couple of reasons. First of all the fact that equities are performing well can in and of itself improve consumer moods. On a more fundamental basis, the key supports to stronger stock market performance e.g. supportive monetary policy and improving earnings are also generally consistent with better economic conditions for consumers. So in essence it becomes a confirming indicator for global equities. Like all sentiment indicators it's worth watching for extremes and divergences. In that sense, the new highs are something to keep in mind.

The GDP weighted composites show EM generally has higher consumer confidence than DM (skewed up by China and India). Cyclically both look much better lately.

At a global composite view there has been significant improvement since the cyclical low in February 2016. There also appears to be a strong link with global equities.

global consumer confidence vs global equities chart

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