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Economy in Brief

U.S. Consumer Confidence Improves Markedly
by Tom Moeller  August 29, 2017

The Conference Board Consumer Confidence Index strengthened 2.4% during August to 122.9 following a 2.3% July rise, revised from 3.2%. The index was just below its recent peak in March and neared the highest level since December 2000. The Action Economics Forecast Survey looked for a lesser increase to 120.0. During the past thirty years, there has been a 70% correlation between the level of consumer confidence and the y/y change in real PCE.

The increase in confidence reflected a 4.0% gain (20.7% y/y) in the present situation index to 151.2, its highest level since July 2001. The expectations reading increased 1.0% (20.8% y/y) to 104.0, its highest level since April.

The percentage of respondents indicating that business conditions are "good" surged to 34.5%, the highest level since January 2001. The percentage saying business conditions are "bad" matched the recovery low of 13.1%. The 35.4% of respondents saying that jobs are "plentiful" was the most since July 2001. The percentage claiming jobs are "hard to get" declined to a sixteen year low of 17.3%. These improved views of labor market conditions led to a labor market differential (plentiful minus hard to get) of 18.1 percentage points. This differential is 97% inversely related to the unemployment rate.

The percentage expecting business conditions to improve over the next six months declined to 19.6%, and remained well below its 26.9% March peak. The percentage expecting more jobs in six months declined to 17.1%, a nine month low and well below the 23.8% March peak. The percentage expecting their incomes to strengthen improved slightly to 20.9%, but remained below the March high.

The expected rate of inflation in twelve months declined to 4.5% and roughly equaled the 12-year low. The percentage expecting higher interest rates over the next twelve months fell to 64.8%, down from a March high of 72.2%, while 6.4% expected to buy a home, down slightly from the recent high.

Confidence amongst individuals over age 55 reached a new high for the cycle. Confidence amongst individuals aged 35-to-54 also improved moderately. Confidence amongst respondents under age 35 also rose following a sharp decline in July.

The Consumer Confidence data is available in Haver's CBDB database. The total indexes appear in USECON, and the market expectations are in AS1REPNA

Conference Board (SA, 1985=100) Aug Jul Jun Y/Y % 2016 2015 2014
Consumer Confidence Index 122.9 120.0 117.3 20.7 99.8 98.0 86.9
  Present Situation 151.2 145.4 143.9 20.7 120.6 111.7 87.4
  Expectations 104.0 103.0 99.6 20.8 86.1 88.8 86.6
Consumer Confidence By Age Group
  Under 35 Years 134.8 130.0 136.7 10.0 122.4 116.0 106.6
  Aged 35-54 Years 123.6 122.2 120.7 9.4 106.2 103.9 92.4
  Over 55 Years 115.6 113.3 107.5 36.8 84.6 84.1 73.8
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