U.S. Consumer Confidence Recovers

Consumers were more upbeat last month. The Conference Board reported that the January index of consumer confidence rose 13.7% from December to 60.6 from a revised 53.3 in December. The latest was the highest level since May and exceeded Consensus expectations for 54.4. During the last ten years there has been a 78% correlation between the level of confidence and the 12-month change in real personal consumption expenditures. The Conference Board data can be found in Haver's CBDB database.

The January improvement reflected a 24.5% m/m gain to 31.0 in the present situations component; its highest since November 2008. The appraisal of business conditions rose sharply. Jobs were seen as hard to get by a greatly reduced 43.4% of respondents and jobs were seen as plentiful by an increased 5.2%. That, however, still was just above the series' historic low of 3.5% reached in October.

The expectations component rose 11.1% from December for the third gain in the last four months. Business conditions in six months were expected to be better by an improved 19.0% of respondents while more jobs were expected by 16.0%. Consumers expect the inflation rate in twelve months to be 5.5%. It's risen from a low of 4.9% in July but remained down from the 2008 high of 7.7%. Interest rates in twelve months were expected to be higher by 51.2% of respondents, down from the April high of 56.1%, but just 13.8% expected rates to fall. An improved 35.2% of respondents expected stock prices to rise. That was near the late-2009 high while a much-reduced 24.5% expected prices to fall. An improved 2.2% of those surveyed plan to buy a home during the next six months, up from the November low of 1.7%. Working the other way, a lesser 22.3% plan to buy a major appliance; a new low since 1995 and down from the 30.9% who planned to buy one back in 2007. A slightly improved 5.1% plan to buy an automobile and just 2.1% plan to buy a new one.