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Economy in Brief

U.S. Consumer Confidence Recovers Small Part Of Earlier Decline
by Tom Moeller   October 26, 2010

The Conference Board reported that consumer confidence improved slightly this month but remained near the lowest level since February. The index of overall confidence rose 3.3% to 50.2 from a little-changed 48.6 in September. Nevertheless, the October level remained 20% below the May high. Consensus expectations had been for slightly less of a m/m increase. 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 October improvement reflected a 3.5% gain in the expectations component but it still was 19.9% below the April high. However, the index remained more-than-double the recession low. Business conditions in six months were expected to be better by just 16.0% of respondents while more jobs were expected by a reduced 14.1%. Consumers expect the inflation rate in twelve months to be 5.0%, 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 43.3% of respondents, down from the April high of 56.1%, and 16.4% expected rates to fall. An improved 27.7% of respondents expected stock prices to rise and 30.5% expected prices to fall.

Finally, consumers' assessment of the present situation remained depressed. It rose just 2.6% m/m and remained 19.8% below the April high. There's been an increased sense of poor business conditions. Jobs were seen as hard to get by a higher 46.1% of respondents and jobs were seen as plentiful by a lessened 3.5%, still near the series' historic low of 3.1% reached in November. Just 8.5% of respondents saw business conditions as good while a slightly reduced 41.9% saw them as bad.

Just 2.1% of those surveyed plan to buy a home during the next six months but a lesser 24.2% plan to buy a major appliance, down from the 30.9% who planned to buy one back in 2007. A slightly improved 5.0% plan to buy an automobile and 2.1% plan to buy a new one.

Conference Board (SA, 1985=100) October September August Y/Y % 2009 2008 2007
Consumer Confidence Index 50.2 48.6 53.2 3.1 45.2 57.9 103.4
  Present Situation 23.9 23.3 24.9 13.3 24.0 69.9 128.8
  Expectations 67.8 65.5 72.0 1.2 59.3 50.0 86.4
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