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Highlights
Right when investors are gaining confidence, consumer confidence is eroding. The Conference Board's consumer confidence index fell a sizable 2.7 points to 46.6 in July, making the hope of May's 54.8 peak a dim memory. The assessment of the current jobs market is the central weakness, with 48.1 percent of consumers saying jobs are hard to get, up from 44.8 percent in June and 43.9 percent in May. The outlook for jobs isn't any better with fewer, 15.0 percent vs. June's 17.5 percent, seeing more jobs six months out. This is spilling over into expectations for income where only 9.5 percent see an improvement six months from now, down from June's 10.1 percent. More also see a decrease in their income, at 18.8 percent for a 6 tenth increase.
Housing data has been on the mend but readings in this report don't point to any further improvement as only 2.1 percent say they plan to buy a house, down 5 tenths from June. Fewer also expect to buy a car and fewer expect to buy any major appliances. Inflation expectations are declining, reflecting the drop in pump prices and also the weak business conditions. Twelve-month inflation expectations are at 5.5 percent, down 4 tenths from June.
This report, together with the Reuters/University of Michigan consumer sentiment report, are pointing unfortunately to continued recession, at least they are raising that risk. Job losses may be easing but workers, many of whom are now losing their benefits, are having a hard time finding jobs. Stocks and commodities fell in immediate reaction to the report while the dollar gained -- all evidence of risk aversion.
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Market Consensus Before Announcement
The Conference Board's consumer confidence index fell 5-1/2 points in June to 49.3. June's decline had followed notable improvement the prior two months. The reversal in June was due to declines in both the present situation and expectations indexes. The expectations index, however, is still relatively high, indicating that consumers still see recovery not far down the road. But for now, the jobs picture still has consumers nervous and the current conditions index could keep the overall index down in the near term.
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