Continuing its upward trend, Consumer Confidence jumped in January for the second straight month. The Conference Board's Consumer Confidence Index was 97.3, increasing 2.7 points from the revised 94.6 in December. Economists' had expected the index to rise to 96.0. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.
According to Lynn Franco, director of the Conference Board's Consumer Research Center, "The upturn in confidence is being driven by growing confidence about the business outlook and job prospects. Consumer expectations for the future are now higher than they have been in more than a year." The Expectations portion of the index, measuring future economic activity, continued to climb, registering 96.9 in January, up from a revised 92.4 in December. The Present Conditions Index, another factor in the total composite index, remained unchanged in January at 97.8. This index is a measure of how consumers perceive the current state of the economy. Spending behavior is closely related to consumers' feelings in the Present Conditions Index.
The University of Michigan's January Consumer Sentiment Index, a comparable index, increased to 94.2 from 88.8 last month. The component indices were mixed in January. The Present Conditions Index was down slightly, 98.1 from 99.0 in December, however Expectations increased 9.4 points to 91.7.
Economists credit the increase in Consumer Confidence to a surge in expectations rather than an improvement in current economic conditions. The expectations component has increased more than 27 points since October 2001. While increased consumer expectations are a sign of recovery, confidence levels are still nearly 16% below levels from a year ago.
In all, the economy seems poised for recovery; new jobless claims are trending downward, the average workweek increased slightly and energy and import prices remain low. Yet some economists are apprehensive about economic recovery. Concerns remain regarding rising consumer debt loads, spent demand for consumer goods and increased bankruptcies. With consumer spending accounting for two-thirds of the economy, analysts are worried that economic recovery will not coincide with a surge in consumer spending. While many economists believe the recession is all but over, they predict recovery will be sluggish at least until 2003.
Sources: www.cnnfn.com
www.conference-board.com
www.economy.com
