Positive Trends Continue In Consumer Confidence

Positive trends are still intact despite an otherwise weak looking 88.7 November reading for the consumer confidence composite index, down from a downward revised but still a 7-year, recovery best of 94.1 in October. A hidden positive in today's report is little change in the jobs-hard-to-get reading, at 29.2 percent which is historically low for this reading and up only a marginal 2 tenths from October. This reading, which is closely watched, points to steady and favorable conditions for the November labor market.

The jobs-hard-to-get reading is a subcomponent of the present situation component which in total, pulled down mostly by monthly declines in business conditions, fell 3.1 points to 91.3 to indicate month-to-month weakness in consumer activity -- not welcome news for the nation's retailers going into Black Friday.

The second component of the composite index, expectations, fell an even steeper 6.8 points to 87.0 which is the lowest reading since June. The decline here reflects declining confidence in future business conditions and some erosion in the jobs outlook. A positive, however, is strength in the key subcomponent for expectations which is future income. Optimism here held nearly steady. Income expectations turn mostly on the jobs outlook but also on the outlook for the stock market and the housing market.

The ongoing burst lower in gasoline prices is driving down inflation expectations which fell 1 tenth to 5.2 percent, a level that is very low for this particular reading and which will get the attention of Fed policy makers who have been voicing concern that inflation right now needs to turn higher.

This report, due to the jobs-hard-to-get reading as well as the future income reading, is not as bad as it looks, especially given the hard comparisons in the prior spike. The Dow is moving to opening lows following today's report. Watch for the twice monthly consumer sentiment report to be released tomorrow and whether it too will show a fall off from recovery highs.

Recent History Of This Indicator:
The Conference Board's consumer confidence index advanced to a new recovery high of 94.5 for October, up from an upwardly revised 89.0 in September and surpassing the previous recovery high of 93.4 in August. The index was last this strong in October 2007, right at the beginning of the Great Recession. October's gain was concentrated almost entirely in the expectations component, which jumped 8.6 points to 95.0 in a reading that isn't quite a recovery high but near one, next only to February 2011's 97.5. The strength in expectations reflects optimism in the outlook for both jobs and income, both of which show convincing gains. Showing only marginal strength was the present situation component which rose only 7 tenths to 93.7. Yet this is still a very strong reading, surpassed only once in the recovery in this year's August reading of 93.9.