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Economy in Brief

U.S. Consumer Confidence Slips For A Second Month
by Tom Moeller  July 28, 2009

According to the Conference Board, consumer confidence fell slightly during July for the second consecutive monthly decline. Despite these shortfalls, however, confidence remained up sharply from the February low. 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.

Consumers' assessment of the current economic conditions fell the hardest last month and remained near the recent low. It remained off by almost two-thirds from a year earlier. Jobs were seen as hard to get by an increased 48.1% of respondents and jobs were seen as plentiful by 3.6% which was near the series' low. Business conditions were seen as good by just 9.1% and that was near the 1991 low. Consumers who thought business conditions were bad rose slightly to 46.3%, still near the highest since 1983.

The decline in the expectations component of confidence lagged just slightly with a 5.3% m/m decline. Still, the index remained near the highest level since late 2007. The percentage of respondents expecting business conditions to improve fell to 18.0% though that remained near the highest level since 2004. A much reduced 18.9% expected conditions to worsen. Only 15.0% of respondents expected any economic improvement to generate more jobs, more than double the percentage at the recent low.

Expectations for the inflation rate in twelve months fell back to 5.5%. That's down from last year's high of 7.7%. Interest rates in twelve months were expected by 51.9% to be higher while 16.6% expected rates to fall. A greatly increased 31.5% of respondents expected stock prices to rise.

Consumers certainly plan to manage their spending plans cautiously. Just 2.1% plan to buy a home during the next six months while 25.4% plan to buy a major appliance. That's versus 30.9% who did back in 2007. Only 4.5% plan to buy an automobile, versus 6.0% in 2007.

The Federal Reserve Board announced that it will soon begin a statistical study of household finances to update data collected at the outset of the economic downturn that began in late 2007.

Conference Board  (SA, 1985=100) July June Y/Y % 2008 2007 2006
Consumer Confidence Index 46.6 49.3 -10.2 57.9 103.4 105.9
  Present Situation 23.4 25.0 -64.4 69.9 128.8 130.2
  Expectations 62.0 65.5 45.2 50.0 86.4 89.7
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