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Economy in Brief

U.S. Consumer Confidence Recovers
by Tom Moeller   January 25, 2011

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.

Conference Board (SA, 1985=100) Jan. Dec. Nov. Y/Y 2010 2009 2008
Consumer Confidence Index 60.6 53.3 54.3 7.3 53.3 45.2 57.9
  Present Situation 31.0 24.9 25.4 23.0 25.4 24.0 69.9
  Expectations 80.3 72.3 73.6 3.9 72.0 59.3 50.0
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