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Economy in Brief

U.S. Consumer Confidence Falls Sharply
by Tom Moeller February 23, 2010

There was a slowing of retail sales during December and January. More weakness may be in the offing given the latest souring of consumers' mood. For February, the Conference Board reported that consumer confidence fell 18.6% from January and that brought down the level of confidence to its lowest since last April. Just a modest m/m decline had been the Consensus expectation for February and 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 Conference Board data can be found in Haver's CBDB database.

Consumers' assessment of current economic conditions slumped by nearly one-quarter m/m. That reversed all of a January increase and left the measure near the historic low. Jobs were seen as hard to get by 47.7% of respondents and jobs were seen as plentiful by only 3.6%. That was up just slightly from the series' historic low. Also at a record low was the percentage of respondents who saw business conditions as good. The percentage of consumers who thought business conditions were bad rose to 46.3%, off somewhat from its peak but nearly the highest since 1983. 

The expectations component of confidence also fell sharply to its lowest level since April. Lessened expectations for business conditions, employment and income have led the latest downdraft. Expectations for the inflation rate in twelve months held stable at 5.2%, 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 52.2% of respondents while 14.2% expected rates to fall. A greatly lessened 28.6% of respondents expected stock prices to rise.  

An improved 2.7% of those surveyed plan to buy a home during the next six months. An increased 27.1% plan to buy a major appliance versus 30.9% back in 2007. Only 4.8% plan to buy an automobile versus 6.0% in 2007 and just 1.8% plan to buy a new one.  

Conference Board (SA, 1985=100) February January December Y/Y % 2009 2008 2007
Consumer Confidence Index 46.0 56.5 53.6 81.8 45.2 57.9 103.4
  Present Situation 19.4 25.2 20.2 -13.0 24.0 69.9 128.8
  Expectations 63.8 77.3 75.9 133.7 59.3 50.0 86.4
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