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Economy in Brief

U.S. Consumer Confidence Firms as Expectations Improve
by Tom Moeller  February 25, 2020

The Conference Board's Consumer Confidence Index rose 0.2% (-0.5% y/y) during February to an index level of 130.7 (1985=100). The rise followed a 1.7% January increase, revised from 2.7%. An increase to 132.5 had been expected in the Action Economics Forecast Survey. Over the last 20 years, there has been a 70% correlation between the level of confidence and the y/y change in real consumer spending.

A higher expectations reading led the overall increase with a 6.3% rise (3.9% y/y) to 107.8 which followed a 1.4% gain. It was offset by a weakened present situation reading which fell 5.1% (-4.5% y/y) to 165.1, after having risen 2.0% in January.

The decline in the present situations reading reflected a lessened 38.6% of respondents indicating that business conditions were good. The figure was 40.9% last July. The jobs reading also fell to the lowest level since June 2019. The reading of  "jobs hard to get" rose sharply, also to the highest level since June.

On the expectations front, the higher reading reflected a gain to 20.4% in respondents who felt that business conditions would improve. The figure had been trending lower, however, since the middle of last year. A steady 16.2% of respondents thought that there would be more jobs, but that was down from 22.1% in Q3'18. A steady 22.0% felt that income would increase.

Expectations for consumer price inflation in twelve months rose to 4.6%, its highest level since October. A lessened 44.1% felt that interest rates would increase, down from 72.3% in the middle of 2018. On the housing front, a greatly increased 2.4% of respondents planned to buy a new home and a strengthened 57.9% intended to buy a major appliance. The percentage of respondents who planned to buy a new car also surged.

Within age groups, confidence amongst respondents who were under age 35 improved m/m, but remained below the high six months earlier. Confidence amongst respondents aged 35-54 also rose to a six-month high. Confidence amongst respondents over age 55 fell sharply m/m but remained up slightly y/y.

The Outlook for the Economy and Monetary Policy in 2020 from Loretta J. Mester, President & CEO, Federal Reserve Bank of Cleveland is available here.

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

Conference Board (SA, 1985=100) Feb Jan Dec Feb Y/Y % 2019 2018 2017
Consumer Confidence Index 130.7 130.4 128.2 -0.5 128.3 130.1 120.5
   Present Situation 165.1 173.9 170.5 -4.5 169.8 164.8 144.8
   Expectations 107.8 101.4 100.0 3.9 100.6 107.0 104.3
Consumer Confidence By Age Group
   Under 35 Years 137.4 132.6 133.1 -5.4 134.2 133.7 130.2
   Aged 35-54 Years 130.9 124.9 127.9 -1.9 130.7 132.2 123.5
   Over 55 Years 126.9 133.8 126.2 0.6 123.8 126.3 112.9
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