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Economy in Brief

U.S. Consumer Confidence Improves Slightly This Month But Remains Off From Recent High
by Tom Moeller August 31, 2010

The Conference Board indicated that consumer confidence rebounded moderately this month following two months of sharp decline. Their consumer confidence index rose 4.9% m/m to 53.5 following a 6.1% July decline that was less than reported initially. Nevertheless, the August level remained down 14.7% from the May high. Consensus expectations had been for an unchanged reading m/m. During the last ten years there has been an 82% correlation between the level of consumer confidence and the y/y change in real consumer spending. The Conference Board data can be found in Haver's CBDB database.

The August improvement was due to a rebound in consumer expectations. The expectations component of confidence rose 7.4% m/m and recovered all of its July decline. The index remained more-than-double the recession low. Consumers expect the inflation rate in twelve months to be 4.9%, a material decline from recent months' expectations and down from the 2008 high of 7.7%. Interest rates in twelve months were expected to be higher by a lessened 43.6% of respondents, down from the April high of 56.1%, and an increased 15.8% expected rates to fall. A greatly lessened 26.3% of respondents expected stock prices to rise and 32.8% expected prices to fall.

Finally, consumers' assessment of the present situation remained depressed and fell a sharp 5.7% this month after a 1.5% July drop. There's been an increased sense of poor business conditions. Jobs were seen as hard to get by an increased 45.7% of respondents and jobs were seen as plentiful by a lessened 3.8%, still  near the series' historic low of 3.1% reached in November. A slightly improved 8.7% of respondents saw business conditions as good while 41.9% saw them as bad.

Just 2.0% of those surveyed plan to buy a home during the next six months while a lessened 25.1% plan to buy a major appliance, down from the 30.9% who planned to buy one back in 2007. A slightly improved 5.0% plan to buy an automobile but just 1.9% plan to buy a new one.

Slowing Pace of Growth from the Federal Reserve Bank of Dallas can be found here.

Conference Board (SA, 1985=100) August July June Y/Y 2009 2008 2007
Consumer Confidence Index 53.5 51.0 54.3 -1.8% 45.2 57.9 103.4
  Present Situation 24.9 26.4 26.8 -2.0 24.0 69.9 128.8
  Expectations 72.5 67.5 72.7 -1.8 59.3 50.0 86.4
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