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Economy in Brief

U.S. Consumer Confidence Firms as Job Market Strengthens
by Tom Moeller  May 29, 2018

Consumers are taking heart from improving labor market conditions. The Conference Board Consumer Confidence Index rose to 128.0 in May (8.8% y/y) from 125.6 during April, initially reported as 128.7. The May level matched expectations in the Action Economics Forecast Survey. Despite the m/m increase, the level of confidence has been moving sideways for the last six months. The indexes in this report are based on 1985=100. During the past 10 years, there has been a 68% correlation between the level of consumer confidence and the y/y change in real PCE.

The present conditions component increased to 161.7 (15.0% y/y) from 157.5 in April. It was the highest level since March 2001. The expectations component rose to 105.6 (3.2% y/y) from 104.3. The latest reading was down 6.0% from the high reached in March of last year.

Jobs were viewed as "plentiful" by 42.4% of respondents in April, the most also since March 2001. Jobs were viewed as "hard to get" by a lessened 15.8%, the fewest in seventeen years. The net jobs assessment improved to +26.6 in May from +22.7 in April. Over the past 15 years, this differential has been 96% inversely related to the unemployment rate. The percentage of respondents indicating the business conditions are "good" increased to a 17-year high of 38.4% in April. The percentage saying business conditions are "bad" dropped to 12.0%.

Expectations for business conditions showed only slight m/m improvement as a lessened 23.1% of respondents thought that business conditions would improve, down from a 26.9% high in March 2017. Expectations that there would be more jobs in six months ticked higher m/m to 19.7%, but was well below last year's 23.8% high. Income was expected to increase in six months by a lessened 21.3%, down from the February high of 23.5% but up from 19.1% one year ago.

Expectations for the inflation rate in twelve months rose sharply to 5.0%, up from November's 4.5% low and the highest reading since September 2016. The percentage expecting higher interest rates over the next twelve months eased to 71.9% but was up sharply from 67.6% in May of last year. Those looking to buy a home in the next six months fell sharply to 5.5% in May, the lowest percentage since October 2016.

Respondents under age 35 years registered a decline in confidence to the lowest reading since October. For those aged 35-54 years, confidence increased moderately m/m but remained below last year's high. And for those over 55 years of age, confidence has been fairly steady for six months.

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) May Apr Mar Y/Y % 2017 2016 2015
Consumer Confidence Index 128.0 125.6 127.0 8.8 120.5 99.8 98.0
  Present Situation 161.7 157.5 158.1 15.0 144.8 120.3 111.7
  Expectations 105.6 104.3 106.2 3.2 104.3 86.1 88.8
Consumer Confidence By Age Group
  Under 35 Years 128.1 131.8 130.8 -7.2 130.2 122.4 116.0
  Aged 35-54 Years 131.3 125.4 127.4 9.9 123.5 106.2 103.9
  Over 55 Years 123.5 122.9 123.4 15.1 112.9 84.6 84.1
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