The Conference Board business research group released its November report on consumer confidence today. The report showed that consumer confidence had leaped from a reading of 96.3 in October to a reading of 101.4 in November--an advance of 5.1 points.

This result is at odds with other recent economic data which indicate that a slowdown is in progress. It is also at odds with the University of Michigan consumer sentiment reading for November which indicated a drop in consumer confidence.

A couple weeks ago I called attention to the fact that sometimes these two indexes are in the same direction and sometimes they are not. I suggested at that time that it might be a good idea to average the two indexes together to obtain a composite confidence index. If we average the Conference Board's November reading [101.4] with the U of M November reading [88.2] we get a value of 94.8 for the composite index. This is higher than October's composite reading of 93.6 which, in turn, is higher than September's composite reading of 93.1. So, the short term trend of the composite confidence index is up. Not as dramatically up as today's Conference Board figure but, nonethless, up.

In yesterday's article I was lamenting that we still hadn't seen the October housing starts and building permits report that was due on November 17. The Bureau of the Census at the Department of Commerce must have been reading my mind because, sure enough, that report was released today.

And it wasn't pretty. Privately owned housing starts in October were at a seasonally adjusted rate of 1,337,000--down 3.74% from September's revised rate of 1,389,000. This is the third straight monthly drop since the peak in July at 1,432,000. Building permits fell from a revised seasonally adjusted annual rate of 1,405,000 in September to a rate of 1,395,000 in October--a drop of .71%. This was the first drop in the permits rate since March.

Both of these indicators are excellent leading indicators of economic activity. In fact the permits indicator is one of the indicators that the Department of Commerce uses in formulating its Composite Index of Leading Indicators [LEI]. Today's report, coupled with yesterday's report of slowing sales of existing homes, appears to be telling us that propective homebuyers are feeling a pinch their pocketbooks.

Byline: Lafferty (MF Merlin)