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Economy in Brief

U.S. Consumer Confidence Slips
by Tom Moeller; June 30, 2009

According to the Conference Board, consumer confidence slipped this month following gains during the prior three months. The slip did not, however, alter the picture of improvement in consumer attitudes. Confidence remained up by more than one-half from the February low and roughly equal to the year ago level. The Conference Board data can be found in Haver's CBDB database.

During the last ten years there has been an 86% correlation between the level of consumer confidence and the y/y change in real consumer spending.

The expectations component of confidence slipped the most last month with an 8.4% decline following three strong monthly increases. Still, the index remained near the highest level since late 2007. The percentage of respondents expecting business conditions to improve slipped to 21.2% but that remained near the highest level since 2004. A much reduced 20.2% expected conditions to worsen. That improvement was expected by 17.4 of respondents to generate more jobs, more than double the percentage at the recent low.

Consumers' assessment of the current economic conditions also slipped m/m and remained near its recent low. It remained off by nearly two-thirds from a year earlier. Jobs were seen as hard to get by a still-high 44.8% of respondents and jobs were seen as plentiful by only 4.5% of respondents. Business conditions were seen as good by just 8.0% and that was near the 1991 low. Consumers who thought business conditions were bad rose slightly to 45.6%, still near the highest since 1983.

Expectations for the inflation rate in twelve months have been roughly stable at 5.9%. That's down from last year's high of 7.7%. Expectations about interest rates have increased sharply with 51.7% of respondents expecting higher rates while 16.3% expect rates to fall. A greatly increased 31.5% of respondents expected stock prices to rise.

Conference Board  (SA, 1985=100) June May Y/Y % 2008 2007 2006
Consumer Confidence Index 49.3 54.8 -3.3 57.9 103.4 105.9
  Present Situation 24.8 29.7 -62.1 69.9 128.8 130.2
  Expectations 65.5 71.5 58.2 50.0 86.4 89.7
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