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Economy in Brief

Consumer Confidence Improved Unexpectedly
by Tom Moeller July 25, 2006

Consumer confidence as reported by the Conference Board rose 1.0% in July to 106.5 and added to a 0.7% June increase that was revised down slightly from the initial report. Consensus expectations had been for a decline in confidence to 104.0.

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 measuring consumers' expectations rose 1.5% (-4.7% y/y). The rise mostly reflected less pessimism about the outlook for business conditions and jobs in six months rather than an outright rise in optimism about the outlook.

Expectations for the inflation rate in twelve months held steady at a reduced 5.1%.

Consumers' assessment of the present situation recovered half of the prior month's decline and rose 0.6% (11.5% y/y). The percentage of respondents who viewed business conditions as good (27.5%) rose and the percentage that viewed jobs as hard to get (19.9%) fell.

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

Conference Board July June Y/Y 2005 2004 2003
Consumer Confidence 106.5 105.4 2.8% 100.3 96.1 79.8
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