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Economy in Brief

U.S. Consumer Confidence Fell To A Record Low
by Tom Moeller   February 24, 2009

The Conference Board reported that its February index of consumer confidence fell to another record low.  The decline to a reading of 25.0 was a one-third drop versus January and it lowered confidence by three-quarters from the July 2007 peak.  The February decline was much deeper than Consensus expectations.

The Conference Board data can be found in Haver's CBDB database.

During the last ten years there has been an 83% correlation between the level of consumer confidence and the y/y change in real consumer spending.

The present conditions index fell 28.6% from the January level and it was off more than three-quarters from a year earlier. Jobs were seen as hard to get by 47.8% of respondents, the highest since 1992 and jobs were seen as plentiful by only 4.4%.  Business conditions were seen as good by just 6.8% and that matched the 1991 low.  Those who thought conditions were bad rose to 51.1%, the highest since 1983.

Consumers' economic outlook continued to worsen as indicated by yet another decline in the expectations index.  The figure fell by more than one-third from January and by more than one-half from last February.  The percentage of respondents expecting business conditions to worsen in six months rose to 40.5%, the highest since 1974.  Just 8.7% expected improvement in conditions.  More jobs were expected by only 7.1% of respondents while a near-record 23.8% foresaw less income.

Expectations for the inflation rate in twelve months have been roughly stable at the February level of 5.9%.  That's down from last year's high of 7.7%. Confusion about the interest rate outlook was evident by the fact that roughly one-third of respondents expected higher interest rates while one-third expected rates to fall.  A separate question indicated that 49.5% expected lower stock prices.

The decline in overall consumer confidence over the last year has been greatest amongst higher income earners.  It has been fairly uniform by age group.

An Experimental Investigation of Why Individuals Conform from the Federal Reserve Bank of New York can be found here.

Prospects for Macro- and Financial Policy is a recent speech given by Gary H. Stern, President of the Federal Reserve Bank of Minneapolis and it available here

Conference Board  (SA, 1985=100) February January Y/Y % 2008 2007 2006
Consumer Confidence Index 25.0 37.4 -67.3 57.9 103.4 105.9
  Present Situation 21.2 29.7 -79.6 69.9 128.8 130.2
  Expectations 27.5 42.5 -52.6 50.0 86.4 89.7
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