Two indicators show the recession eased in January, but there are signs the economy remains fragile.
For the third consecutive month, the Consumer Balance Index (CBI) rose in January, indicating an ease in the recession. This latest increase, combined with upticks in November and December, retraces seven points of its 22-point decline that began in November 2007 with a drop from 95 to 87 points. The largest decline in the CBI came in October 2008 when it dropped ten points from the previous month to a low of 73 points.
CONSUMER BALANCE INDEX
(Source of Information: 8,200 consumers sampled nationally and interviewed by phone at the rate of 480 per month, September 2007 to January 2009)
(Photo: http://www.newscom.com/cgi-bin/prnh/20090122/CG61312)
The CBI is the primary indicator of how consumers react to changes in the economy. It tracks consumer ability to sustain their current level of spending, by ascertaining how consumers gauge the balance between their income and assets versus debt and spending obligations. An increase in CBI indicates a potential increase in consumer spending; a decrease signals a potential reduction in spending.
The second indication that the recession eased is a three-percent increase in the proportion of consumers reporting to have the Strongest financial balances. These consumers have a CBI of 163.
“On the negative side, there are signs the economy remains fragile. Consumers are not confident enough to spend all their income,” says Leo Shapiro, founder, SAGE. More consumers in January 2009 than in December 2008 reported they had money left over for savings at the end of the month. The Index that tracks active shopping for new cars, housing, and eight other major goods declined 14 points, from 95 in December to 81 in January. The largest declines in active shopping are for carpeting, furniture and housing.
“The signs are that the recession reached a bottom in October 2008, but it is not clear that the recession has reached its absolute bottom,” concludes Shapiro.
The next report on the CBI will be released in mid-February. In the interim, please feel free to contact Dr. Leo J. Shapiro personally at 520-878-0188, with suggestions, ideas, questions, comments and requests for more information.
Source: Prnewswire.com
