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Tuesday, July 26, 2011

Consumer Confidence Remains Low

Consumer confidence experienced a slight up tick in July, according to the Conference Board. Unfortunately, this is not saying very much, especially when you look at the underlying numbers.

The Conference Board noted that its Consumer Confidence Index stood at 59.5 in July, compared to 57.6 in June. However, these are dismally low levels.

Consider, for example, that the CCI stood at 65.4 in April of this year, at 111.9 in July 2007, and at 134.2 in July 2006.

Consumers continue to carry a heavy burden of uncertainty.

Break down the numbers further, and it turns out that only consumers' short-term outlook improved a bit in July - with those expecting business conditions to improve over the next six months bumping up to a mere 17.7 percent from 16.5 percent in June. At the same time, though, those expecting business conditions to worsen also increased, from 14.9 percent to 15.2 percent.

All other measures, on balance, got worse.

The assessment of present conditions was down. The Board reported: "Those stating business conditions are ‘good' decreased to 13.4 percent from 13.7 percent, while those claiming business conditions are ‘bad' increased to 39.0 percent from 38.4 percent."

As for the current job market: "Those claiming jobs are ‘hard to get' increased to 44.1 percent from 43.2 percent, while those stating jobs are ‘plentiful' remained unchanged at 5.1 percent."

Looking ahead, consumers were as mixed on the jobs outlook, as they were on business conditions. In terms of employment: "Those anticipating more jobs in the months ahead increased to 16.7 percent from 13.8 percent. However, those expecting fewer jobs also increased to 21.8 percent from 20.7 percent."

In terms of the two broad measures that make up the CCI, the Present Situation Index registered 35.7 percent in July, down from 36.6 percent in June, and compared to 138.3 four years ago. Meanwhile, the Expectations Index came in at 75.4 in July, up from 71.6 last month, but four years ago it was at 94.4.

Consumer confidence will rise with an improving economy - when entrepreneurs and businesses are cranking up investment and jobs. Unfortunately, the main obstacle to rekindled business and investor confidence remains the anti-entrepreneur, anti-business policies being pushed by President Obama, namely, higher taxes, more regulation, and more government spending, along with the Fed's misguided loose money escapades. In order to fix consumer confidence, we need to fix some enormous policy mistakes.

Raymond J. Keating
Chief Economist
SBE Council

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