Consumer confidence improved in October due to slightly more favorable prospects for the national economy. There was no improvement in how consumers viewed their financial prospects, however. This repeats a familiar pattern in recent years: improved pros-pects for the national economy support gains in overall confidence, but when those gains were not translated into an improved personal financial outlook, a subsequent retreat in confidence occurred. Much greater gains in con-fidence are required before another false start can be ruled out. Widespread distrust of the President and Con-gress will make a sustained and cumulative improvement more difficult to reach in the months ahead.

Stagnant Finances Expected

Three-quarters of all consumers expected stagnating finances in the October 2011 survey. Only one-in-five con-sumers expected their finances to improve during the year ahead. Just 38% expected income increases during the year ahead, the smallest proportion ever recorded in the long history of the surveys. Even with relatively low inflation, the majority of households expected declines in their inflation-adjusted incomes.

Confidence in Economic Policies at Record Lows

When asked to evaluate the economic policies of the government, 57% of all consumers judged current policies unfavorably, the highest proportion ever recorded. Just 7% of consumers judged current economic policies fa-vorably in October. An additional question asked consumers about their confidence in the Federal Reserve. Less confidence in the Federal Reserve was reported by 61% in October, above the 49% reported in 2010 and 2009.

Consumer Sentiment Index

The Sentiment Index rose to 60.9 in the October 2011 survey, just ahead of the 59.4 in September, but below the 67.7 recorded last October. Most of the October gain was in the Expectations Index, a component of the Index of Leading Economic Indicators, which rose to 51.8 in October from 49.4 in September, but still remained well below the 61.9 recorded last October. The Current Conditions Index was 75.1 in the October 2011 survey, between the 74.9 in September and last October’s 76.6.