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Economy in Brief

Consumer Confidence in May Fell Unexpectedly Hard
by Tom Moeller May 27, 2008

For May, the Conference Board reported that consumer confidence fell by 8.9% m/m which was roughly double the decline registered in April. The decline also doubled the consensus expectation for a 4.5% drop.

The May shortfall left confidence at its lowest level since late 1992.

The present conditions index led the May decline with a 9.2% m/m drop to the lowest level since late 2003. By region the index is off notably in the Pacific (-52.2% y/y), mid-Atlantic (-54.2% y/y), the South Atlantic (-49.0% y/y), and in the New England (-43.7% y/y) states.

Just 13.1% of respondents saw business conditions as good, the lowest since early 1992. Jobs as plentiful were seen by a much lessened 16.3% while 28.0% saw jobs as hard to get, the highest since late 2004.

The expectations component of the index fell 8.6% to its lowest level since the mid-1970s. The percentage of respondents expecting business conditions to worsen in six months rose to 33.6% and the percentage looking for income to decline rose to 14.9%.

Expectations for the inflation rate again rose, last month to 7.7%. That was the highest level in the series' 20 year history.

Consumer Confidence Surveys: Can They Help Us Forecast Consumer Spending in Real Time? is a 2006 article from the Federal Reserve Bank of Philadelphia. It answers "no" and it is available here.

Conference Board  (SA, 1985=100) May April Y/Y % 2007 2006 2005
Consumer Confidence Index 57.2 62.8 -47.3 103.4 105.9 100.3
  Present Situation 74.4 81.9 -45.3 128.8 130.2 116.1
  Expectations 45.7 50.0 -49.3 86.4 89.7 89.7
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