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Economy in Brief

U.S. Consumer Confidence Strengthens to 2000 High
by Tom Moeller  February 27, 2018

The Conference Board Consumer Confidence Index increased 5.2% during February (12.7% y/y) to 130.8, following a 1.0% January rise to 124.3, revised from 125.4. It was the highest index level since November 2000. A level of 126.7 had been expected in the Action Economics Forecast Survey. The indexes are based on 1985=100. 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 rise in overall confidence reflected a 5.5% increase (5.6% y/y) in the expectations index to 109.7 after January's 3.2% rise. The present situation index reading rose 5.0% (20.8% y/y) to 162.4 following a 1.2% decline.

The percentage of respondents indicating conditions are "good" was fairly steady at 35.8% this month. The percentage saying business conditions are "bad" declined to 10.8%, the least since March 2001. Job market readings remained firm. Jobs were viewed as "plentiful" by an expansion high, 39.4% of respondents. Jobs were viewed as "hard to get" by 14.7%, also equaling the 2001 low. The net jobs assessment improved to +24.7, the most favorable since May 2001. The differential is 97% inversely related to the unemployment rate.

The increase in the overall expectations reading reflected an increase in the percentage expecting business conditions to improve over the next six months. It surged to 25.8% from 21.5% in January. Those expecting more jobs increased to 21.6%, though that was down from the 23.8% expansion high reached during March of last year. Incomes are expected to improve by 23.8% of respondents, up from the full-year 2009 low of 9.9%.

Expectations for the inflation rate in twelve months ticked higher to 4.7% and has been fairly stable since the 4.8% low during all of 2016.The percentage expecting higher interest rates over the next twelve months increased to 70.4%, the most since April 2017, and up from the July 2016 low of 52.3%. Those looking to buy a home in the next six months remained depressed at 6.3%, down from December's high of 7.4%.

By age group, confidence increased the most among individuals over age 55, up 17.5% y/y. Confidence amongst those aged 35-54 gained 15.0% y/y, while younger respondents, under age 35, saw confidence improve 6.1% y/y.

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

Semiannual Monetary Policy Report to the Congress from Fed Chairman Jerome H. Powell is available here.

Conference Board (SA, 1985=100) Feb Jan Dec Y/Y % 2017 2016 2015
Consumer Confidence Index 130.8 124.3 123.1 12.7 120.5 99.8 98.0
  Present Situation 162.4 154.7 156.5 20.8 144.8 120.3 111.7
  Expectations 109.7 104.0 100.8 5.6 104.3 86.1 88.8
Consumer Confidence By Age Group
  Under 35 Years 127.9 128.3 128.7 6.1 130.2 122.4 116.0
  Aged 35-54 Years 135.7 127.3 126.3 15.0 123.5 106.2 103.9
  Over 55 Years 128.7 119.0 116.5 17.5 112.9 84.6 84.1
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