Consumer Confidence Down Again

In October, the Conference Board's index of Consumer Confidence fell to 85.0 and added 2.9% to the 17.9% m/m decline during the prior month.

Consensus expectations had been for little change at 88.0. Last week, the University of Michigan reported that its October measure of consumer sentiment fell 2.0% m/m (-17.8% y/y).

During the last twenty years there has been a 52% correlation between the level of consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.

The index of consumers' expectations fell 3.9% m/m (-24.6% y/y) and the assessment of the present situation slipped 2.0% (+15.1% y/y). Jobs were viewed as hard to get by an increased 25.3% of survey participants.

The Conference Board’s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

The latest release from the National Association of Realtors is available here.

The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

The US average retail gasoline price continued lower last week and fell to $2.60 per gallon from $2.73 during the prior week.

Crude oil prices continued lower as well. WTI crude fell yesterday to $61.13 per barrel versus an average of $62.44 during last week and versus the late August high of $69.82.

Deflation: Making Sure "It" Doesn't Happen Here, a 2002 speech made by Ben S. Bernanke can be found here.

The healthy October rises in German and Dutch measures of business confidence following yesterday's report of continued rising business confidence in France are beginning to suggest a pickup in economic activity within the Euro Zone.

Although the pessimists still outweigh the optimists in Germany, the excess of pessimists declined in October to 3.5% from 8.9% in September according to the IFO measure of confidence. In the Netherlands, the optimists who had exceeded the pessimists in September by 1.3% increased their excess over the pessimists to 4.3% in October. The percent balances of the optimists over the pessimists for both German and Dutch business are shown in the first chart.

In appraising current economic conditions in Germany, businessmen have generally been more pessimistic than optimistic. In the entire history of the IFO confidence data, from January, 1991 to date, the only time when the balance of opinion on current conditions was positive was the period from January 1991 to March 1992 and the month of May 2000.In their expectations of conditions six month ahead, German businessmen have generally been more optimistic, but even here, the times when the optimists outweighed the pessimists have been few and the positive balances small. The second chart shows the history of the IFO's percent balances of opinion of German businessmen for current conditions and expectations of conditions six months ahead. Because of this apparent bias in the IFO data, it is more useful to look at the changes in the data rather than the absolute values.

In the third chart we show the year-to-year changes in the appraisals of current conditions and expectations of conditions six month ahead. Here we see a marked increase in confidence in October both in current conditions and expectations for conditions six month ahead.