May’s Consumer Confidence Research Notes

by Jim Baird on May 25, 2010

The Consumer Confidence Index tends to reflect consumer impressions of the direction of the jobs market; the recent marked improvement in the pace of job creation is clearly lifting spirits. 

Investors are clearly looking past today’s positive Consumer Confidence data and are fixated on the greater economic risk that continues to emanate from Europe and the rising tensions in the Korean peninsula.

The survey suggests that consumers are viewing the uptick in the unemployment rate in April in an appropriate light. That increase in the jobless rate was a result of disenchanted individuals re-entering the labor force in anticipation of further job growth in the months ahead, not further job losses.

Consumer expectations for future economic conditions improved considerably in recent months.  The recent selloff in the stock market will undoubtedly weigh on the collective consumer mood, although much of the selloff has occurred since the survey was conducted.

We do not expect discretionary spending to return to pre-recession levels for some time.  Nonetheless, should we see continued improvement in the jobs market as anticipated in the months ahead, improving personal income should be supportive of spending growth.

The consumer confidence index rose to 63.3, a result much better than expected. 

The index has rebounded nicely off its historical low of 25.3, which was reached in February of last year, but remains well below its historical average of 95.3.

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