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Economy in Brief

Consumer Confidence Fell To A Record Low
by Tom Moeller January 27, 2009

The Conference Board reported that its December index of consumer confidence fell to a record low last month. The drop to a level of 38.0 followed a November uptick and it lowered Confidence by more than one-half from its year ago level. The December decline about matched Consensus expectations.

During the last ten years there has been an 82% correlation between the level of consumer confidence and the y/y change in real consumer spending.

The present conditions index fell by nearly one-third from the November level, off by three-quarters during the year. Jobs were seen as hard to get by 42.0% of respondents, the highest since 1992 and jobs were seen as plentiful by only 6.2%. Business conditions were seen as good by just 7.7%, the lowest since 1991. Those who thought conditions were bad rose to 46.0%, also the highest since 1992.

And the economic outlook was dire as indicated by another decline in the expectations index. The percentage of respondents expecting business conditions to worsen in six months rose to 32.8%, near the highest since the credit crunch of 1980. A modest 12.4% expected improvement in conditions. More jobs were expected by just 9.9% of respondents while a near-record 19.1% foresaw less income.

Expectations for the inflation rate in twelve months fell further 5.8%, the lowest level since February.

The decline in confidence around the country was fairly uniform and varied little by income level.

The Economic Outlook and Some Challenges Facing the Federal Reserve is a speech made by Philadelphia Fed President Charles I. Plosser and it can be found here.

Conference Board  (SA, 1985=100) December November Y/Y % 2008 2007 2006
Consumer Confidence Index 38.0 44.7 -58.1 57.9 103.4 105.9
  Present Situation 29.4 42.3 -74.0 69.4 128.8 130.2
  Expectations 43.8 46.2 -42.2 49.9 86.4 89.7
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