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Economy in Brief

U.S. Consumer Confidence Eases in October, Disappointing Expectations
by Tom Moeller  October 27, 2020

• Confidence backpedals m/m but rises sharply from recession low.

• View of present conditions continues to strengthen; expectations deteriorate.

• Confidence again rises amongst all age brackets.

The Conference Board's consumer confidence survey indicated modest deterioration this month. The October index was 100.9 (1985=100), down 0.4% (-20.0% y/y) from September's little-revised 101.3. Expectations had been for an increase to 102.8 in the Action Economics Forecast Survey. Over the last 25 years, there has been a 58% correlation between the level of confidence and the y/y change in real consumer spending.

The index of expected conditions in six months fell 4.4% (+4.1% y/y) in October, the third decline in four months. A fairly steady 36.3% respondents expected improvement in business conditions in the next six months, but an increased 17.0% expected a worsening. A higher 33.2% expected a rise in employment while a raised 20.2% expected a decline. Income was expected to improve by an increased 18.4% of respondents, while a slightly higher 14.2% expected a decline.

The present situation index increased 5.8% in October to the highest level since March. The increase reflected a steady 17.5% of respondents who felt that business conditions were good and a lessened 33.9% who felt they were bad. The labor market was perceived as slightly better with the "labor market differential" (jobs plentiful minus jobs hard-to-get) improving to the highest level since March.

Expectations for the inflation rate in twelve months eased in October to 5.6%, remaining down from a 6.6% high in June. A slightly lessened 41.5% felt that interest rates would increase during the next twelve months while a lessened 20.8% felt they would decline. Plans to buy a house, new or existing, increased in this month to 6.6% of respondents, although this remained down from 7.7% in July. A lessened 9.7% of respondents planned to buy a car and a lower 44.2% planned to buy a major appliance within six months, roughly the lowest since January 2015.

By age group, the index of confidence amongst those under 35 improved 2.6% m/m (-22.1% y/y). Confidence of those aged 36-54 also rose 4.6% (-23.3% y/y) to the highest level since March. And for those over age 55, confidence rose 4.5% (-16.1% y/y), also to the highest level in six months.

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

Conference Board (SA, % Chg.) Oct Sep Aug Oct Y/Y 2019 2018 2017
Consumer Confidence Index -0.4 17.4 -5.9 -20.0 -1.4 8.0 20.7
   Present Situation 5.8 15.3 -10.5 -39.7 3.1 13.8 20.3
   Expectations -4.4 18.8 -2.6 4.1 -6.0 2.6 21.1
Consumer Confidence By Age Group
   Under 35 Years 2.6 12.0 -9.4 -22.1 0.3 2.7 6.4
   Aged 35-54 Years 4.6 15.1 -5.7 -23.3 -1.1 7.0 16.4
   Over 55 Years 4.5 21.8 -5.4 -16.1 -1.9 11.8 33
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