Consumer confidence at four year high

NOTWITHSTANDING THE EURO-FATIGUE, AMERICAN’S WILL SLOG THROUGH

The U.S. Consumer Confidence Index (CCI) is an indicator designed to measure consumer confidence, which is defined as the degree of optimism on the state of the economy that consumers are expressing through their activities of savings and spending.

Consumer confidence improved in each of the past nine monthly surveys, rising to its highest level since October 2007. More favorable job and wage prospects were the main factors behind the improved outlook. Record numbers of consumers mentioned that they heard of favorable employment trends despite the jobs slowdown recently reported by the Labor Department. The continued revival of consumer confidence critically depends on renewed job growth. One issue that only a few consumers even mentioned was the potential impact on the domestic economy from the European financial crisis.

Job Growth
Many more consumers reported hearing about recent job gains than job losses. Indeed, the fewest consumers reported hearing of job losses in May than anytime since mid 2007. In each of the past three months, a majority of consumers reported an improved economy, and twice as many expected further improvement rather than renewed declines in the year ahead. Most consumers, however, expected the gains to be modest. Confidence in the government’s economic policies remained relatively low, with 41% holding negative views.

Buying Plans Improve
Favorable views on buying conditions for household durables were cited by 63% in May, the highest level in more than a year, driven up by the availability of price discounts. Vehicle buying conditions were judged more favorably in May by households with incomes over $75,000, those most likely to purchase new vehicles. Favorable views of vehicle buying conditions were held by 72%, up from 67% one month ago and 57% one year ago.

Consumer Sentiment Index
The Sentiment Index was 79.3 in the May 2012 survey, up from 76.4 in April and 74.3 in last May’s survey. Although the largest gain from last month was in consumers’ assessments of current economic conditions, compared with a year ago, both the current and expected components of the Sentiment Index posted nearly equal increases. The May Expectations Index reached its highest level since July 2007, and the Current Conditions Index reached its highest level since January 2008.

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