By Chris Stone
Since its beginning in 1916, the Conference Board (CB) has been a force for positive progress in the world of business. The research it conducts and the conferences it organizes bridge the divide between the academic and professional realm, giving backbone to the idea that what's good for business can also improve the world's quality of living. For traders and economic forecasters, many CB releases have become standard measures of the financial condition in the United States.
The Conference Board's releases can generally be divided into two categories: economic indicators and consumer research. The three components of the Business Cycle Indicators (BCI) and the Help-Wanted Advertising Index (HWI) are examples of economic indicators while the Consumer Confidence Survey, the Consumer Internet Barometer and the CEO Confidence Survey are examples of consumer research. These seven releases make up the bulk of the information that has made the CB so familiar to traders.
Let's review some of the main ideas about each CB release that we covered.
Business Cycle Indicators (BCI)
- Peaks and troughs in the components of the Business Cycle Indicators can mean key turning points in the economic cycle - where overall historical values and trends are less important.
- Historically, calculating the CB's diffusion index and applying it as a complement to each component of the BCI has improved the data's reliability.
- Data revisions may hinder accurate historical interpretation of the BCI data.
- In the past, prolonged and broad-based declines in the Composite Index of Leading Indicators have led to a period of contraction in the economy, usually three to nine months later.
- The Composite Index of Coincident Indicators is the best measure of the current state and stage of the business cycle, usually lagging the market cycle by a few months.
- The Composite Index of Coincident Indicators can be used in conjunction with the Composite Index of Leading Indicators and other measures of current market conditions to anticipate the next stage of the business cycle.
- The Composite Index of Lagging Indicators is most useful to economists and financial analysts in confirming the end of a recession or expansion.
- Historically a trough and positive turn upward in the Composite Index of Lagging Indicators has signaled that the current economic expansion has entered a mature phase.
- The Help-Wanted Advertising Index is an indirect measure of unemployment that has remained consistent in its methodology since 1951.
- The HWI is used by economists to locate historical inefficiencies in the job-matching process.
- An inefficiency (or a slack) in the job market may signal a coming decline in productivity and competitiveness.
- Economists have discovered a way using JOLTS to correct for inaccuracies in the HWI, which will likely lead to new developments in interpreting the indicator.
- The HWI sometimes leads the unemployment rate by one or two months (in an inverse relationship), but this is not always true.
- The CEO Confidence Survey, released quarterly, measures both past and future business sentiment from executives from 10 industry groups.
- The CEO Confidence Survey often leads interest rates/inflation because an increase or decrease in executive expectations has a corresponding effect on the demand for loanable funds.
- The CEO Confidence Survey often also leads GDP because an increase or decrease in the business sentiment of executives leads to a corresponding change in production management.
Consumer Confidence Index
- The Consumer Confidence Index (CCI) is a survey that has been conducted by mail each month since 1967. It has approximately 3,500 respondents.
- Consumers account for two-thirds of domestic spending in the United States, making their positive expectations for the economy a crucial element of economic expansion.
- Two subindexes are published in connection with the Consumer Confidence Index. These include the Current Situation Index (measures present sentiment) and the Expectations Index (measures future expectations).
- It is debatable whether consumer expectations lead or are the result of other economic indicators. Economists are divided on the issue.
- Research has indicated that the CCI has a measurable influence on bond market prices the morning of the release.
- The Consumer Internet Barometer is a survey, with about a 70% response rate, looking at what people are shopping for and how they are using the internet.
- The Conference Board publishes three measures each quarter to report the results of the survey. These measures are of consumers' usage, satisfaction, and trust of the internet.
- Positive changes in the three barometer figures will usually mean increased business for internet retailers and internet service providers, from both new and return customers.
- A negative change in the usage figure is especially troubling for internet retailers, due to the natural expansion of the internet.
- The press release containing the survey results often includes valuable, industry-specific information for traders.
TradingLearn to put the CB data sets to trading use. Each chapter takes you through one of the board's benchmark indicators or surveys, their significance and their applications.
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