Consumer Confidence 2008

Consumer Confidence Index
The US Consumer Confidence Index (CCI) is defined as the degree of optimism on the state of the economy that consumers are expressing through their activities of savings and spending. It details consumer attitudes and buying intentions based on The idea that the more confident people feel about the economy, their jobs, and incomes, the more likely they are to make purchases. The Conference Board, an independent economic research organization, is the company that measures the CCI monthly based on a survey of 5,000 households. This survey encompasses consumers’ opinions on current conditions (40% of the survey) and future expectations of the economy (60% of the survey). These measurements indicate consumption levels. This data is important in many ways, the Federal Reserve Bank looks at the CCI when determining interest rate changes, and it also affects stock market prices. When faced with a decreasing index, the government must choose between a variety of options to try and stimulate the economy.On the other hand, a rising trend in consumer confidence indicates improvements in consumer buying patterns, which means manufacturers can increase production and hiring and banks can expect increased demand for credit, among many other possible scenarios.

So what has the Consumer Confidence Index said lately about the state of our economy?

• The CCI greatly decreased in June of 2008 to the lowest in 16 years.
• It improved moderately in July and continued to rise into August and September
  
• Then fell to an all time low in October.
• The Index now stands at 38.0 (1985=100), down from 61.4 in September. The Present Situation Index decreased to 41.9 from 61.1 last month. The Expectations Index declined to 35.5 from 61.5 in September.
• The decline in the Index (-23.4 points) is the third largest in the history of the series, and the lowest reading on record.
• "Consumer confidence readings suggest that the economy remains stuck in neutral, but may be showing signs of improvement by early next year," says Lynn Franco, Director of The Conference Board Consumer Research Center

Updated November 25, 2008

• The Consumer Confidence Index now stands at 44.9 (1985=100), up from 38.8 in October.
  
• The Present Situation Index decreased to 42.2 from 43.5 last month.
  
• The Expectations Index increased to 46.7 from 35.7 in October.
• Says Lynn Franco, Director of The Conference Board Consumer Research Center: "The persistent declines in the Present Situation Index suggest that the economy has weakened further in the final months of this year. Inflation expectations, which have been at historically high levels in recent months, subsided considerably as a result of falling gas prices. But, despite the improvement in the Expectations Index this month, consumers remain extremely pessimistic and the possibility that economic growth will improve in the first half of 2009 remains highly unlikely."

source

The U.S. Economic Forecast

Updated: November 6, 2008

	2008			2009			2008	2009	2010
	III Q*	IV Q	I Q	II Q	III Q	IV Q	Annual	Annual	Annual
Real GDP	-0.3	-1.9	-1.6	-1.0	0.3	1.1	1.4	-0.7	1.9
CPI Inflation	6.9	0.5	2.0	2.3	2.5	2.8	4.5	2.7	2.8
Real Consumer Spending	-3.1	-1.2	-1.5	-0.7	1.6	1.9	0.5	-0.8	2.0
Unemployment Rate (%)	6.0	6.4	6.9	7.2	7.5	7.6	5.7	7.3	7.6
90 Day T-Bills (%)	1.67	1.12	0.75	0.75	0.75	0.75	1.64	0.75	1.06
10 Yr Treas Bonds (%)	3.83	3.75	4.00	4.25	4.48	4.73	3.78	4.37	4.98

* Actual data

Updated: November 24, 2008

	2008			2009			2010		2008	2009	2010
	III Q*	IV Q	I Q	II Q	III Q	IV Q	I Q	II Q	Annual	Annual	Annual
Real GDP	-0.3	-2.5	-1.8	-1.2	0.2	1.0	2.7	3.0	1.4	-0.9	1.9
CPI Inflation	6.9	-4.5	2.0	2.3	2.5	2.8	2.9	2.9	4.2	1.7	2.8
Real Consumer Spending	-3.1	-2.2	-1.5	-0.7	1.6	1.9	2.6	2.2	0.5	-0.9	2.0
Unemployment Rate (%)	6.0	6.5	6.9	7.2	7.5	7.6	7.7	7.6	5.7	7.3	7.6
90 Day T-Bills (%)	1.51	0.40	0.50	0.50	0.90	1.00	1.10	1.50	1.42	0.73	1.75
10 Yr Treas Bonds (%)	3.86	3.60	3.70	3.80	4.25	4.48	4.71	4.71	3.75	4.06	4.71

* Actual data

Signs Of Improvements to come?

• The results showed that consumers had a bleak view of the current economy, but harbored better hopes for the future.
• The leading index increased in September, the first increase in the last five months. Real money supply, consumer expectations, the interest rate spread, and the index of supplier deliveries all made large positive contributions to the index in September, more than offsetting the negative contributions from building permits, stock prices, initial claims for unemployment insurance (inverted) and the average workweek in manufacturing. (source)
  

Future Predictions of The Conference Board

• a weak future GDP in the upcoming quarters
  
• further improvement in the trade balance is forecasted for 2009.
• Consumer spending, retail sales, and vehicle sales fell in August, and hopes for a significant rebound before well into next year are low.
• The government takeover of Fannie Mae and Freddie Mac may restore some of the confidence in the housing market, at least temporarily, as mortgage rates appear to be falling somewhat.
• Slow but positive growth is the best the U.S. economy can hope for the next couple of quarters and even well into next year.