Consumer Confidence Takes Small Steps Forward

“It is better to take many small steps in the right direction than to make a great leap forward only to stumble backward.” Old Chinese Proverb

Much as I would like to plaster this on huge banners all over the halls of Congress, I turn instead to the latest Consumer Confidence survey for January to see what steps consumer are taking in their attitudes toward the economy.

Consumer confidence improved in January, but the increase was larger than expected, rising 2.3 points to an unexpected 55.9. Analysts had predicted a much narrower move, closer to the December index of 53.6.

According to the survey, consumers are viewing business conditions a bit more favorably. The present situations index rose to 25 from 20.2 and the expectations index rose to 76.5 from 75.9. On closer examination, the expectations index showed that fewer consumers were expecting their incomes to fall, but more consumers were expecting business conditions and job availability over the next six months to either remain the same or decline.

We may have to wait until next month to see how the surprise election in Massachusetts and latest buzz out of Washington about tax changes favoring the middle class move consumer attitudes.

The Consumer Confidence report from the Conference Board surveys 5000 households monthly. The current conditions subindex constitutes 40% or the total index; the expectations subindex constitutes 60% of the total index. An index change of 5 points is considered significant. The index uses a baseline of 100 (1985) to indicate a healthy economy.

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