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Economy in Brief

U.S. Consumer Confidence Improves Modestly
by Tom Moeller  December 26, 2009

The consumer's mood regarding the economy has improved, but after the jump last spring little headway developed. The Conference Board indicated that consumer confidence during January rose 4.3% from December after similar gains during the prior two months. Due to earlier declines, however, these increases left confidence roughly equal to last May. The Conference Board data can be found in Haver's CBDB database.

Despite the loss of forward momentum confidence remained up roughly one-half from last January. During the last ten years there has been an 87% correlation between the level of consumer confidence and the y/y change in real consumer spending.

Consumers' assessment of the current economic conditions jumped by one-quarter this month but only back to last summer's high. It remained near the historic low. Jobs were seen as hard to get by 47.4% of respondents and jobs were seen as plentiful by only 4.3%. That was up just slightly from the series' historic low. Business conditions were seen as good by only 9.0% and that also was near the series' low. Consumers who thought business conditions were bad rose slightly to 46.1%. While off somewhat from its high the reading was still nearly the highest since 1983. ยท The expectations component of confidence improved slightly m/m and the index remained near the highest level since late-2007. Most expected business conditions & employment to remain the same and that's a vast improvement from the deterioration seen last winter. 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 an increased 52.3% of respondents, while a reduced 12.5% expected rates to fall. A greatly increased 36.3% of respondents expected stock prices to rise.

Consumers continued to manage their spending plans cautiously. A reduced 1.8% plan to buy a home during the next six months while just 24.7% plan to buy a major appliance. That's versus 30.9% back in 2007. Only 5.1% plan to buy an automobile versus 6.0% in 2007. Just 2.0% plan to buy a new one.

Real Time Underlying Inflation Gauges for Monetary Policymakers from the Federal Reserve Bank of New York is available  here

Conference Board (SA, 1985=100) January December November Y/Y % 2009 2008 2007
Consumer Confidence Index 55.9 53.6 50.6 49.5 45.2 57.9 103.4
  Present Situation 25.0 20.2 21.2 -15.8 24.0 69.9 128.8
  Expectations 76.5 75.9 70.3 80.0 59.3 50.0 86.4
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