Consumer Confidence Index climbs in January
CHICAGO (AP) – Americans’ confidence in the economy improved modestly in January for the third straight month, as they begin to feel slightly better about business conditions and the job picture, according to a survey released Tuesday.
The Conference Board’s Consumer Confidence Index increased to 55.9 – the highest in more than a year but still relatively gloomy. That compares with 53.6 in December.
January’s index was better than the expected 53.5 forecast by economists.
Economists watch confidence numbers closely because consumer spending accounts for about 70 percent of U.S. economic activity. It takes a reading of 90 to indicate an economy on solid footing and 100 or more to indicate growth.
The new figures still don’t point to an end to the nation’s economic woes any time soon.
“Consumers’ short-term outlook, while moderately more positive, does not suggest any significant pickup in activity in the coming months,” Lynn Franco, director of The Conference Board’s Consumer Research Center, said in a statement.
Tuesday’s figures are based on a survey of 5,000 households by the private research group.
Capital Economics analyst Paul Dales said Americans’ sentiments are well below the Index’s historic average of 95.
“In other words, despite the fact the economy probably grew at an annualized rate in excess of 5 percent in the fourth quarter, the labor market appears to be on the cusp of generating net employment gains, interest rates are at record lows and the rally in equities remains largely intact, confidence remains incredibly depressed,” Dales wrote in a research note. “This all suggests the legacy of the recession will live long in the mindset of consumers.”
While consumers were less dire about their income prospects, “pessimists continues to outnumber the optimists,” Franco said.
Job security is a vital part of how Americans view the economy. Those who feel better about their jobs feel more comfortable spending money, which in turn fuels the nation’s economy. That means without a meaningful and steady increase in Americans’ faith that their paychecks will keep coming, and in turn a pickup in spending, there’s unlikely to be any strong revival in the economy.
“Without a sustained acceleration in consumption growth, the overall economic recovery is doomed to disappoint,” Dales wrote.
The unemployment rate held steady in December at 10 percent, down slightly from a 26-year high of 10.2 percent in October. Some analysts worry it will start climbing again in coming months, and could even rise as high as 10.5 percent next summer.
The Consumer Confidence index hit a historic low of 25.3 in February after registering 37.4 last January and enjoyed a three-month climb from March through May, fueled by signs that the economy might be stabilizing.
Since June, it has bounced along anemically between 47 and 55 as rising unemployment has taken a toll.
Also Tuesday, a report showed that The Standard & Poor’s/Case-Shiller home price index rose for in November – its six straight month of increases. And 14 of 20 metro areas posted improvements from the month before.
That index is now up 3.4 percent from its bottom in May, but still 30 percent below its peak in May 2006.