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Weekly Economic Commentary


Consumer Confidence Index: Near Recession Low in October

October 25, 2011

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The Conference Board’s Consumer Confidence Index dropped 6.6 points to 39.8 in October. This reading is approaching the recession low of 25.3 recorded in February 2009. The Present Situation Index fell 7.0 points to 26.3, while the Expectations Index dropped to 48.7 from 55.1 in September. Essentially, the latest consumer confidence numbers are raising a red flag in an already weak economic environment.

DEC 10.25 1The outlook of consumers has taken a big hit in the past six months (see Chart 2), with shaky financial markets, a weak housing market, and worrisome labor market playing an important role.

DEC 10.25 2Survey respondents have become increasingly pessimistic about labor market conditions. The number of respondents indicating “jobs are hard to get” increased to 49.4% from 47.1% in September and the number indicating that “jobs are plentiful” declined to 3.4% from 5.6% in October. The net of these two indexes has a positive correlation with unemployment rate and it held nearly steady in October (43.7 vs. 43.8 in September). The implication is that an unchanged unemployment rate of 9.1% in October is entirely possible.

DEC 10.25 3August 2011 Home Prices: Small but Noteworthy Improvement

The seasonally adjusted Case-Shiller Price Index held steady in August compared with July. On a year-to-year basis, the index fell 3.8%, the smallest decline since February 2011. The FHFA House Price Index of August dropped 4.0% from a year ago, the smallest reduction since December 2010. The decelerating trend of both home price indexes suggests that home prices are stabilizing, albeit gradually in small magnitudes. However, the large supply of foreclosed property presents a challenge and bodes poorly for a rapid improvement of home prices.DEC 10.25 4a

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.