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Economy in Brief

Consumer Confidence Fell Sharply
by Tom Moeller August 29, 2006

The Conference Board reported that consumer confidence in August fell a sharp 6.9% to 99.6, its lowest level since November. The July level was revised up slightly but Consensus expectations had been for a more moderate decline in August confidence to 102.9.

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 reversed all of the prior month's modest uptick and fell 8.0% (-0.3% y/y) to the lowest level (123.4) this year. The percentage of respondents who viewed business conditions as good (26.1%) fell though the percentage that viewed jobs as hard to get (21.1%) rose to its highest level this year.

The index measuring consumers' expectations fell 5.7% (-10.2% y/y). Expectations for better business conditions worsened to the lowest (15.9%) since October and fewer respondents expected more jobs.

Expectations for the inflation rate in twelve months jumped to 5.5%, the highest level since May.

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

Wealth inequality is vast and growing from the Economic Policy Institute is available here

Conference Board August July Y/Y 2005 2004 2003
Consumer Confidence 99.6 107.0 -5.6s% 100.3 96.1 79.8
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