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Economy in Brief

U.S. Consumer Confidence Improves To Highest Since 2008
by Tom Moeller  May 25, 2010

The Conference Board indicated that consumer confidence was unshaken in early May by U.S. stock market declines nor by European market turmoil. Their consumer confidence index rose 9.7% m/m to 63.3, its highest level since March 2008. The gain outpaced the Consensus expectation for a rise to 59.0. During the last ten years there has been an 82% 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.

The expectations component of confidence improved the most m/m to its highest level since August 2007. Improved expectations for business conditions led the gain while expectations for employment and income rose to lesser extents. Consumers expect the inflation rate in twelve months to be 5.3% as they did last month and that remained down from last year's high of 7.7%. Interest rates in twelve months were expected to be higher by a lesser 54.1% of respondents but a slightly increased 12.5% expected rates to fall. A lessened 31.7% of respondents expected stock prices to rise.

Consumers' assessment of the present situation increased 7.1% m/m and May was improved by one-half from December's low. Jobs were seen as hard to get by a reduced 43.6% of respondents but jobs were seen as plentiful by only 4.6%. That was up just slightly from the series' historic low reached in November. Also improved was the percentage of respondents who saw business conditions as good. The percentage of consumers who thought business conditions were bad fell to 39.3%, off more-than ten points from its peak during the recession.

A reduced 1.9% of those surveyed plan to buy a home during the next six months. Also down slightly m/m to 26.2% were those who plan to buy a major appliance, versus 30.9% who planned to buy one back in 2007. An improved 6.0% plan to buy an automobile versus 6.0% in 2007 and a greater 2.8% plan to buy a new one, just off the series' historic low.

The Shape of Things to Come from the Federal Reserve Bank of San Francisco can be found here.

Conference Board (SA, 1985=100) May April March y/y % 2009 2008 2007
Consumer Confidence Index 63.3 57.7 52.3 15.5 45.2 57.9 103.4
  Present Situation 30.2 28.2 25.2 1.7 24.0 69.9 128.8
  Expectations 85.3 77.4 70.4 19.3 59.3 50.0 86.4
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