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Economy in Brief

Consumer Confidence Up: Jobs Plentiful, Inflation Stable
by Tom Moeller January 31, 2006

The Index of Consumer Confidence, as measured by the Conference Board, rose 2.4% to 106.3 during January. This third consecutive monthly increase exceeded Consensus expectations for a lesser gain to 105.0. The increase was in line with the 2.1% m/m (-2.2% y/y) rise in Consumer Sentiment reported last week by the University of Michigan.

During the last twenty years there has been a 52% correlation between the level of consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.

Consumers' assessment of the present situation added 6.4% (14.5% y/y) to a revised 6.6% December increase. Jobs were viewed as plentiful by 26.9% of respondents, a sharp increase from December and the highest since September, 2001. Fewer (20.3%) thought jobs were hard to get, also the lowest since 2001.

The index of consumers' expectations dipped slightly month to month (-8.9% y/y). Fewer expected better business conditions in six months and fewer expected that there would be more jobs.

Inflation in twelve months was expected at a 5.1% rate, down slightly from the 5.2% expected in December and down sharply from the 6.8% expected last September.

The Conference Board’s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

Conference Board Jan Dec Y/Y 2005 2004 2003
Consumer Confidence 106.3 103.8 1.1% 100.3 96.1 79.8
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