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Economy in Brief

U.S. Consumer Confidence Recovers Further
by Tom Moeller   November 30, 2010

The Conference Board reported that consumer confidence improved modestly for the second month during November but remained down sharply from the May high. The index of overall confidence rose 8.4% to 54.1 following a little-changed 2.7% increase during October. Nevertheless, the November level remained 14% below the May high. The latest gain outpaced Consensus expectations. 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 November improvement reflected a 9.9% gain in the expectations component. Business conditions in six months were expected to be better by a still-low16.7% of respondents while more jobs were expected by only 15.5%. Consumers expect the inflation rate in twelve months to be 5.1%, 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 42.6% of respondents, down from the April high of 56.1%, but just 16.6% expected rates to fall. An improved 34.6% of respondents expected stock prices to rise. That was near the late-2009 high while a much-reduced 24.9% expected prices to fall.

Finally, consumers' assessment of the present situation remained depressed. It rose just 2.1% m/m following a downwardly revised October uptick 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 46.5% of respondents and jobs were seen as plentiful by just 4.0%, still near the series' historic low of 3.1% reached in November. A diminished 8.1% of respondents saw business conditions as good while an increased 43.6% saw them as bad.

A reduced and near record low 1.7% of those surveyed plan to buy a home during the next six months. Also, a lesser 24.4% plan to buy a major appliance, down from the 30.9% who planned to buy one back in 2007. A slightly improved 5.4% plan to buy an automobile and just 1.9% plan to buy a new one.

The Effect of Question Wording on Reported Expectations and Perceptions of Inflation from the Federal Reserve Bank of New York is available here.

Conference Board 
(SA, 1985=100)
Nov Oct Sep Y/Y % 2009 2008 2007
Consumer Confidence Index 54.1 49.9 48.6 6.9 45.2 57.9 103.4
  Present Situation 24.0 23.5 23.3 13.2 24.0 69.9 128.8
  Expectations 74.2 67.5 65.5 5.5 59.3 50.0 86.4
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