The State Street Investor Confidence Index increased slightly, from 88.1 to 89.9 in September, and The Conference Board Consumer Confidence Index, which had declined sharply in August, remained essentially unchanged during the month at a 45.2 reading.
The State Street index declined slightly in North America to 85.1, down from 86.1. The gains in the global index were driven by improved investor outlook in Europe and Asian, with the European Investor Confidence Index gaining 5.6 points to reach 95.7, and the Asian Investor Confidence Index rising 5.5 points to 100.7. A reading of 100 indicates that institutional investors are neither increasing nor decreasing their allocations to risky assets.
“On the face of it, it may seem surprising to measure an increase in Global Investor Confidence in a month in which equity volatility has increased substantially,” said Harvard University Professor Kenneth Froot, who developed the index along with Paul O’Connell of State Street Associates.
“There are two points that should be kept in mind about the increase,” Froot continued. “First, confidence remains in the 80s, a relatively low level, albeit better than the low 80s observed in late 2008. Second, despite all of the concern surrounding sovereign balance sheets, corporate balance sheet remain in relatively good shape at present, and this is an attractive feature of equities for institutional investors.”
As for The Conference Board index, Lynn Franco, director of The Conference Board Research Center, said that the gain in September was only “marginal” and that consumers expressed concern about their expected earnings, which could continue to depress consumer spending. “In addition, consumers’ assessment of current conditions declined for the fifth consecutive month, a sign that the economic environment remains weak,” Franco said.
As for consumers’ assessment of current conditions, those who think business conditions are “bad” remained unchanged at 40.4%. Those claiming business conditions are “good” decreased from 14.1% to 11.7%, and those saying jobs are “hard to get” increased to 50.0% from 48.5% the month before. Nonetheless, 5.5% think jobs are “plentiful,” up from 4.8%.
Looking out to the next six months, there was a slight improvement, with 22.6% expecting business conditions to worsen, down from 24.6%. However, 11.3% expect business conditions to improve, down from 11.8%.
-- This article first appeared on Money Management Executive.