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Economy in Brief

U.S. Consumer Confidence Strengthens
by Tom Moeller  August 28, 2018

Consumer confidence improved this month to its firmest level since October 2000. The Conference Board Consumer Confidence Index during August jumped 4.3% (10.8% y/y) to 133.4 from 127.9 in July, initially reported as 127.4. The August level exceeded expectations for 127.0 in the Action Economics Forecast Survey. The level of confidence had been moving sideways since November until this latest rise. The indexes in the report are based on 1985=100. During the past 10 years, there has been a 68% correlation between the level of consumer confidence and the y/y change in real PCE.

The present conditions component increased 3.7% (16.0% y/y) to 172.2, its highest level since December 2000. The expectations reading gained 5.1% (5.8% y/y) to 107.6, a six-month high.

Business conditions were viewed as "good" by a strengthened 40.3% of respondents, but viewed as "bad" by just 9.1%. Jobs were viewed as "plentiful" by an increased 42.7% of respondents in August. Jobs were viewed as "hard to get" by a lessened 12.7%, the fewest since March 2001. The net jobs assessment reading increased to +30.0, a 17-year high. Over that time period, the differential has been 95% correlated to the unemployment rate.

Expectations for business conditions improved m/m as 24.3% of respondents thought that conditions would improve. That was still down, however, from a 26.9% high in March 2017. Income was expected to increase in six months by a sharply higher 25.5%, up from 19.7% just three months ago. Expectations that there would be more jobs in six months was little changed at 21.7% of respondents, up from a 14.5% low during all of 2016.

The expected inflation rate in twelve months declined m/m to 4.8%, its lowest level since April. It was down from the 5.0% July high. The percentage expecting higher interest rates over the next twelve months fell to 69.4%. Those looking to buy a home in the next six months improved sharply m/m to 6.0%.

Confidence amongst respondents under age 35 years backpedaled slightly from the highest level since May of last year. For those aged 35-54 years, confidence surged to an 18-year high. And for those over 55 years of age, confidence also improved strongly.

The Consumer Confidence data is available in Haver's CBDB database. The total indexes appear in USECON, and the market expectations are in AS1REPNA.

Conference Board (SA, 1985=100) Aug Jul Jun Y/Y % 2017 2016 2015
Consumer Confidence Index 133.4 127.9 127.1 10.8 120.5 99.8 98.0
  Present Situation 172.2 166.1 161.7 16.0 144.8 120.3 111.7
  Expectations 107.6 102.4 104.0 5.8 104.3 86.1 88.8
Consumer Confidence By Age Group
  Under 35 Years 134.1 138.3 127.0 5.9 130.2 122.4 116.0
  Aged 35-54 Years 135.5 125.6 132.0 11.1 123.5 106.2 103.9
  Over 55 Years 131.9 123.7 122.8 15.2 112.9 84.6 84.1
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