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Economy in Brief

U.S. Consumer Confidence Weighed Down By Lowered Expectations
by Tom Moeller   September 28, 2010

The Conference Board reported that consumer confidence fell sharply last month to the lowest level since February. The index of overall confidence fell to 48.5 from a downwardly revised 53.2 in August. Moreover, the September level was nearly one-quarter below the May high. Consensus expectations had been for a roughly 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 September decline in the overall index reflected a 9.2% decline in the expectations component to a level 15.5% below the April high. Nevertheless the index remained more-than-double the recession low. Business conditions in six months were expected to be better by just 14.9% of respondents. More jobs were expected by a reduced 14.5%. 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 41.9% of respondents, down from the April high of 56.1%, and an increased 18.4% expected rates to fall. A greatly lessened 25.1% of respondents expected stock prices to rise and 35.8% expected prices to fall.

Finally, consumers' assessment of the present situation remained depressed and fell a sharp 7.2% this month after a 5.7% August drop. There's been an increased sense of poor business conditions. Jobs were seen as hard to get by a higher 46.1% 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 lessened 8.1% of respondents saw business conditions as good while 46.1% saw them as bad.

Just 1.9% of those surveyed plan to buy a home during the next six months but an increased 27.5% plan to buy a major appliance, still down from the 30.9% who planned to buy one back in 2007. A stable 4.7% plan to buy an automobile and 2.0% plan to buy a new one.

Conference Board (SA, 1985=100) September August July Y/Y 2009 2008 2007
Consumer Confidence Index 48.5 53.2 51.0 -9.2% 45.2 57.9 103.4
  Present Situation 23.1 24.9 26.4 0.4 24.0 69.9 128.8
  Expectations 65.4 72.0 67.5 -11.3 59.3 50.0 86.4
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