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Consumer Confidence Index: Now at a 3-Year High

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February 22, 2011 – Comments (4)

This is a very interesting development. Recent consumer confidence is on an uptrend and has been rising for awhile. However, it is still low historically speaking. Doug Short as always keeps excellent track of economic funamentals, valuation, and sentiment.

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http://dshort.com/articles/Conference-Board-Consumer-Confidence-Index.html
Consumer Confidence Index: Now at a 3-Year High
February 22, 2011  Monthly Update


The Latest Conference Board Consumer Confidence Index was released this morning based on data collected through February 10. The 70.4 reading was higher than the consensus estimate of 67.0, reported by Briefing.com and a rise over the January upward revision of 64.8. Here is an excerpt from the Conference Board report.

Says Lynn Franco, Director of The Conference Board Consumer Research Center: "The Consumer Confidence Index is now at a three-year high (Feb. 2008, 76.4), due to growing optimism about the short-term future. Consumers' assessment of current business and labor market conditions has improved moderately, but still remains rather weak. Looking ahead, consumers are more positive about the economy and their income prospects, but feel somewhat mixed about employment conditions."

Consumers' appraisal of present-day conditions improved moderately in February. Those stating business conditions are "good" increased to 12.4 percent from 11.3 percent, while those claiming business conditions are "bad" was unchanged at 39.6 percent. Consumers' assessment of the labor market was also more positive than in January. Those saying jobs are "plentiful" rose to 4.9 percent from 4.6 percent, while those stating jobs are "hard to get" decreased to 45.7 percent from 47.0 percent.

Consumers' short-term outlook was more optimistic than in January. Those expecting business conditions to improve over the next six months increased to 24.4 percent from 24.0 percent, while those anticipating business conditions will worsen declined to 10.4 percent from 12.2 percent.

Consumers were mixed about the job market. Those expecting more jobs in the months ahead edged down to 19.8 percent from 20.8 percent, however, those anticipating fewer jobs decreased to 15.4 percent from 21.2 percent. The proportion of consumers expecting an increase in their incomes rose to 17.3 percent from 15.3 percent.   More...

The More Sobering Historical Context

Let's take a step back and put Lynn Franco's interpretation in a larger perspective. The table here shows the average consumer confidence levels for each of the five recessions during the history of this data series, which dates from June 1977. The latest number is very close to the average confidence level of recessions.

4 Comments – Post Your Own

#1) On February 22, 2011 at 12:12 PM, checklist34 (99.72) wrote:

the rise of the 401k has the negative effect of making our society a wee bit too interwoven with wall street.  Markets up, ocnfidence up.  Markets drop, confidence drops. 

Chicken or the egg?  Tail or dog?

This can't be a good thing.  

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#2) On February 22, 2011 at 1:33 PM, amassafortune (29.66) wrote:

If consumers noticed the one out of eight people using food stamps, confidence would take a hit. It is nice that these people no longer have to hand over coupons as they did years ago. By swiping plastic like everyone else, it adds to the impression that the economy is back to normal. Food stamp users, though, can only take this inflation hit in decreased food volume. 

If the Fed had targeted a controlled level of acceptable deflation instead of inflation, 1 of 8 citizens would be eating a little better and be a little more prepared for work or school. 

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#3) On February 22, 2011 at 2:03 PM, binve (< 20) wrote:

amassafortune ,

>>If consumers noticed the one out of eight people using food stamps, confidence would take a hit. It is nice that these people no longer have to hand over coupons as they did years ago. By swiping plastic like everyone else, it adds to the impression that the economy is back to normal.

I think that is a very valid observation. There is a pseudo normalcy at place here. We have some signs of a recovery, but the most conspicuous absence is the lack of jobs: http://caps.fool.com/Blogs/john-mauldin-an-improving/542383.

Things are extremely 'uneven' in the economy right now. Some companies and sectors are doing exceptionally well, others are not. The fact is though, the consumer is still in a balance sheet recession.

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#4) On February 22, 2011 at 4:04 PM, rfaramir (29.43) wrote:

I, too, agree with amassafortune:

In a bust following a boom, the boom's malinvestments need to be adjusted (up to liquidated) to accomodate reality after being deceived by the artificially low interest rates. This should result in deflating prices, perhaps sharply, during the adjustment.

Unlike the overleveraged financial sector which is scared to death, deflation means the rest of us get more economically powerful as our dollars buy more goods and services due to lower prices. We should not fear deflation.

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