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Economy in Brief

Consumer Confidence Fell Less Than Expected
by Tom Moeller May 30, 2006

Consumer confidence, as reported by the Conference Board, fell less than expected in May from what was a four year high in April. The 6.0% decline to 103.2 from a revised 109.9 contrasted with Consensus expectations for a decline to 100.0 and compared to a 9.5% decline in the University of Michigan's May Index of Consumer Sentiment.

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.

The index of consumers' expectations slumped 9.3% (-10.4% y/y). Expectations for employment in six months slipped but expectations for an increase in income fell to the lowest level (16.6%) since 2003. Expectations for the inflation rate in twelve months rose to 5.6% versus a recent low of 4.8% in March.

Consumers' assessment of the present situation reversed the increase in April with a 2.7% decline (+12.5% y/y). The percentage of respondents who viewed jobs as plentiful (28.6%) fell moderately but the percentage that viewed jobs as hard to get (20.5%) rose to the highest level this year.

Consumers' appraisal of current business conditions fell as a lesser 28% viewed it as good and an increased 15.4% viewed it as bad.

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

Conference Board May April Y/Y 2005 2004 2003
Consumer Confidence 103.2 109.8 12.4% 100.3 96.1 79.8
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