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Economy in Brief

Consumer Confidence Crumbled With Lower Home Prices
by Tom Moeller November 27, 2007

According to the Conference Board Survey consumer confidence dropped 8.3% in November to a reading of 87.3, the seventh m/m decline of 2007 and the largest since September 2005. The decline was to the lowest level in two years. A much lesser drop to 91.4 had been generally expected by economists.

The expectations index fell out of bed and posted a 14.1% m/m drop. It is off by a quarter during the last twelve months. Expectations for employment (more jobs) fell to a meager 10.8% looking for a rise, the least since the recession of 1990.Only 12.4% of respondents expected better business conditions, the least since 2000 while 18.7% expected an improvement in their income. That was down just slightly.

Plans to buy major appliances in the next six months improved slightly from a very depressed October level but the percentage intending to buy a home collapsed to just 2.5%, the least since 1994.

Just 2.0% of respondents planned to by a new automobile within the next six months, the least since 1974.

The present conditions index fell 2.2%, similar to the October m/m decline. The decline was to a level which was the lowest in about two years. Just 22.3% saw business conditions as good, the least since 2004, and 23.2% saw jobs as plentiful. A lesser 21.3% of respondents viewed jobs as hard to get.

The expected inflation rate in twelve months jumped to 5.7% from 5.1% in October, the highest expectation in two years.

According to the S&P/Case-Shiller home price index Composite 20, U.S. home prices fell 0.9% m/m in September. The decline pulled the y/y comparison to a negative 4.9% and since the beginning of this year house prices have fallen 3.8%.

Home prices in San Diego California were extremely weak with a 9.6% y/y decline as were prices in Miami Florida which fell 10.0% y/y. In Las Vegas home prices fell 9.0% y/y and in Los Angeles prices fell 7.0%.

More moderate, but still substantial, declines were registered in New York (-3.6% y/y), Chicago (-2.5% y/y) and Denver (-0.9%).

The index of just 20 U.S. cities and their surrounding areas is not adjusted for the quality or the size of the home. It fell five percent in August from a year ago.

Conference Board
 (SA, 1985=100)
November October Y/Y 2006 2005 2004
Consumer Confidence Index 87.3 95.2 -17.1% 105.9 100.3 96.1
  Present Conditions 115.4 118.0 -8.0% 130.2 116.1 94.9
  Expectations 68.7 80.0 -25.2% 89.7 89.7 96.9
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