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Economy in Brief

Not a Shining Moment for U.S. Consumer Confidence
by Robert Brusca June 26, 2007

The present situation index is doing its leap frog advance thing and this month is one of its landing hops not an advancing hop. Expectations have moved to a weak flat-lining mode as they often do at mature stages of an expansion. If we did not have HIGH gas prices to blame we might be worried about this…

But what we do have is improving regional MFG surveys and evidence of still strong job growth. We do not have the accompanying signs that would make us really worried. My take on housing is that its declines are less severe; some regions are showing erratic advances and new home prices even rose 6% Yr/Yr. It hardly seems like all the news is bad. But then I’m not on anti-depressants and I don’t work at a firm that is up to its eyeballs in sub-prime paper. OK the high gas prices were a bummer. But the economic news is generally improving.

Still, many regions of the country are just having a real tough time – see table below.
The East North Central region is in bad shape AKA the rust belt. Old industry and auto sector troubles are raging in these states where current conditions, the strong reading of the trio, is some 20% lower than its level at end of the last recession. New England and the West North Central states are also laggards. But most regions are 20% above those lows with the Western Mountain States and the Pacific States considerably better off. Moreover, this month took all the regional readings down hard except New England.

While the regional reports look pretty glum, the responses arrayed by category do not. The confidence index is still in the top 15% of its post-recession range, as is the present situation. Expectations are weaker, in the 54th percentile of their range (see below).

As for survey components, business conditions in the present situation are in the top 20% of their range as is employment. For expectations, the percentiles are obviously lower: 48th percentile for business conditions expected, 49th percentile for employment conditions expected and 43rd percentile for income expected. Buying plans are low especially for houses, the bottom 10 percentile of their range. However, nearly everybody is planning to buy an appliance as that gauge stands in the 95th percentile of its range.

What we have is a weak month for confidence. The weakness still has not driven the levels of the index to a depressing state, it was just a large monthly decline. Now we look to the future to see if the weakness unwinds and how rapidly.

Conference Board Consumer Confidence: Current Condition Trends by Region
Regional Confidence from Oct-03 to Jan-07 % Above % Below
  Jun-07 May-07 Yr Ago % Y/Y Recsn-End Pre-Recsn Recsn-End Pre-Recsn
New England 116.9 113.8 114.8 1.8% 112.3 207.1 4.1% -43.6%
MidAtlantic 106.9 117.0 101.8 5.0% 88.7 150.7 20.5% -29.1%
East North Central 73.9 86.3 81.0 -8.8% 92.8 175.6 -20.4% -57.9%
West North Central 131.5 136.0 130.2 1.0% 126.9 172.8 3.6% -23.9%
South Atlantic 129.5 144.3 134.5 -3.7% 106.1 178.9 22.1% -27.6%
East South Central 113.6 130.5 122.7 -7.4% 92.5 146.9 22.8% -22.7%
West South Central 138.0 167.4 146.4 -5.7% 113.2 177.2 21.9% -22.1%
Mountain 151.8 177.4 156.7 -3.1% 108.7 178.9 39.7% -15.1%
Pacific 145.9 167.4 149.9 -2.7% 87.9 169.7 66.0% -14.0%
Pre-recession is 1998-2000
Percentage of Regions with confidence improving
CurrCond improving Jun-07 May-07 Apr-07 Mar-07 Nov-06 Oct-06 Sep-06 Aug-06
MO/MO or as noted 11.1% 66.7% 11.1% 55.6% 88.9% 22.2% 55.6% 33.3%
Conference Board Components for Consumer Confidence
  Current Max/Oct'03 Min/Oct'03 Year Ago Percentile
Confidence Index 103.9 111.2 61.4 105.4 85.3%
Present Situation 127.9 138.5 59.7 132.2 86.5%
Expectations 87.9 110.2 61.4 87.5 54.3%
  Jun-07 Percentile standing    
  Diffusion Overall Good Bad Normal
Present Situation -- 86.5% -- -- --
Business Conditions 55.5 80.5% 85.7% 11.5% 36.9%
Employment 53.0 79.3% 83.8% 12.6% 18.6%
Expectations -- 54.3% -- -- --
Business Conditions 52.6 38.8% 20.7% 34.8% 68.7%
Employment 48.5 49.2% 20.7% 34.8% 68.7%
Income 55.0 43.8% 42.0% 23.0% 71.6%
Buying plans          
Automobile -- 34.1% -- -- --
House -- 10.5% -- -- --
Major Appliance -- 96.9% -- -- --
Percentile of range since Oct 2003 to date. 100% is High; 0% is Low
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