U.S. consumer confidence surges to 7 1/2–year high

Consumers in Chicago
Consumer confidence is on the rise (Yasufumi Saito/Medill)

By Yasufumi Saito

Greater chances of getting a job and lower gasoline prices are making Americans feel more comfortable about today’s economy like it was before the recession.

U.S. consumer confidence jumped sharply in January to its strongest level since August 2007, according to a report Tuesday by The Conference Board, a non-profit business research group.

The Consumer Confidence Index surged 9.8 points to 102.9 from a revised 93.1 in December, exceeding Wall Street’s estimate of 95.5 complied by Bloomberg L.P.

“A more positive assessment of current business and labor market conditions contributed to the improvement in consumers’ view of the present situation,” said Lynn Franco, director of economic indicators at The Conference Board, in a statement.

“Consumers also expressed a considerably higher degree of optimism regarding the short-term outlook for the economy and labor market, as well as their earnings,” Franco added.

“Obviously having cheaper gasoline and increased disposable income contributed to build consumer confidence,” said Michael Englund, chief economist at Action Economics LLC, “it’s beneficial especially for the U.S. since our economy is using such a huge amount of gasoline every day.

“But it’s still unclear whether it’s good or not,” he added. “We might see lots of unemployed people in the mining section over the next several months.”

Lindsey Piegza, chief economist at Illinois-based Sterne Agee Group Inc., has a different view. “Lower gas prices tend to skew the survey in a more positive direction,” she said. “Yet I do not think it gives an accurate sense of the malaise and inadequacy that many Americans still feel.”

Consumers thinking today’s business conditions are “good” increased 3.4 percentage points to 28.1 percent from 24.7 percent in December, while those who believe commercial conditions are “bad” fell more than 2 percentage points to 16.8 percent from 18.9 percent, the report stated.

Consumers’ assessment of the labor market also solidly improved. Those who stating jobs are “plentiful” rose 3.3 percentage points to 20.5 percent from 17.2 percent in December, while those claiming jobs are “hard to get” declined 1.6 percentage points to 25.7 percent from 27.3, according to the report.

The index is based on a monthly survey of approximately 3,000 samples about consumers’ opinions on current economic and labor conditions as well as expectations for future conditions. The index benchmark is 1985.

Photo at top: Consumer confidence is on the rise (Yasufumi Saito/Medill)