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Economy in Brief

U.S. Consumer Confidence Lowest Since February
by Tom Moeller July 27, 2010

The Conference Board indicated that consumer confidence continued its recent decline this month.  Their consumer confidence index fell 7.2% m/m to 50.4 following a 13.4% June decline that was slightly less than reported initially. The July level was the lowest since February though it remained improved from last year. Consensus expectations had been for a slightly smaller decline in the index to 51.0. 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.

Overall, weaker expectations continued to drive overall confidence lower. The expectations component of confidence fell 8.4% m/m following June's 14.1% drop. Nevertheless the index remained up by more-than-double the recession low. Consumers expect the inflation rate in twelve months to be 4.9%, a material decline from recent months' expectations and down from the 2008 high of 7.7%. Interest rates in twelve months were expected to be higher by a lessened 46.7% of respondents and an increased 15.5% expected rates to fall. A greatly lessened 23.7% of respondents expected stock prices to rise and an increased 37.8% expected prices to fall.

Also, consumers' assessment of the present situation remained depressed and fell 2.6% this month after a 10.1% June drop. There's been an increased sense of poor business conditions. Jobs were seen as hard to get by an increased 45.8% of respondents and jobs were seen as plentiful by only 4.3%. That was up just slightly from the series' historic low of 3.1% reached in November. A slightly improved 9.0% of respondents saw business conditions as good while 43.6% saw them as bad.

Just 1.9% of those surveyed plan to buy a home during the next six months. Improved m/m, however, were the 28.5% who plan to buy a major appliance. That's still down from the 30.9% who planned to buy one back in 2007. A low 4.7% plan to buy an automobile and just 1.5% plan to buy a new one.

Conference Board (SA, 1985=100) July June May Y/Y 2009 2008 2007
Consumer Confidence Index 50.4 54.3 62.7 6.3% 45.2 57.9 103.4
  Present Situation 26.1 26.8 29.8 12.0 24.0 69.9 128.8
  Expectations 66.6 72.7 84.6 5.0 59.3 50.0 86.4
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