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Economy in Brief

U.S. Consumer Confidence Drops Again
by Tom Moeller October 27, 2009

Earlier gains in consumer confidence have flagged with the continued run-up in unemployment. The Conference Board indicated that consumer confidence during October fell 10.7% from September. The decline was the fourth in the last five months though confidence remained nearly double this Winter's 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 again this month and remained near the historic low. It remained off by almost two-thirds from one year earlier. Jobs were seen as hard to get by an increased 49.6% of respondents and jobs were seen as plentiful by 3.4% which was near the series' historic low. Business conditions were seen as good by just 7.7% and that also was near the series' low. Consumers who thought business conditions were bad rose slightly to 47.1%. While off somewhat from its high the reading still near the highest since 1983.

The expectations component of confidence fell hard from September but the index remained near the highest level since late-2007. The percentage of respondents expecting business conditions to improve slipped to 20.8% though that remained near the highest level since 2004. Though down slightly m/m, an improved 16.3% of respondents expected economic improvement to generate more jobs, more than double the percentage at the recent low. However, that gain was not expected to generate much more income.

Expectations for the inflation rate in twelve months held stable at 5.3%, the lowest level since 2007 and down from last year's high of 7.7%. Interest rates in twelve months were expected to be higher by 49.5% of respondents, while 15.8% expected rates to fall. A greatly increased 32.7% of respondents expected stock prices to rise.

Consumers continued to manage their spending plans cautiously. Just 2.3% plan to buy a home during the next six months while just 23.3% plan to buy a major appliance. That's versus 30.9% back in 2007. Only 4.4% plan to buy an automobile versus 6.0% in 2007. Just 1.4% plan to buy a new one.

Conference Board  (SA, 1985=100) October September Y/Y % 2008 2007 2006
Consumer Confidence Index 47.7 53.4 22.9 57.9 103.4 105.9
  Present Situation 20.7 23.0 -52.4 69.9 128.8 130.2
  Expectations 65.7 73.7 84.0 50.0 86.4 89.7
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