Consumer confidence on the rise
NEW YORK – Consumer confidence jumped to its highest level in two years in June, buoyed by an improved job outlook, the New York-based Conference Board reported Tuesday.
The Consumer Confidence Index increased nearly 9 points to 101.9, up from a revised reading of 93.1 in May. The latest reading was much better than the 95 that analysts had expected.
Lynn Franco, director of the Conference Board’s Consumer Research Center, said the strong improvement in current business conditions propelled consumer confidence to the highest level since June 2002, when the indicator was 106.3.
The Present Situation index is now 104.8, up from 90.5 in May. The Expectations Index, which measures consumers’ outlook over the next six months, rose to 100 from 94.8.
“Looking ahead, consumers expect the economy to continue to grow at a healthy clip and to continue to generate additional jobs,” Franco said. “And, with prices at the pump beginning to ease, the short-term outlook remains favorable.”
Economists closely track consumer confidence because consumer spending accounts for two-thirds of all U.S. economic activity.
The news about consumer confidence was encouraging given that June is turning out to be a weak month for retail sales. Both Wal-Mart Stores Inc. and Target Corp. cut their sales forecast for June because of unseasonably cool weather.
Mark Vitner, economist at Wachovia Corp., suspects that higher gasoline prices also dampened spending, but he said he believes the blip is “only temporary.”
“If gasoline prices keep coming down over the summer, then the damage is limited,” he said. If gas prices don’t continue to decrease, Vitner believes there will be an impact on consumer spending in 2005.
Nevertheless, Vitner feels encouraged by consumers’ opinion of current business conditions. “Things are clearly getting better,” he said.
Consumers’ assessment of current business conditions improved considerably in June. Those saying conditions are “good” rose to 25.6 percent, up from 22.2 percent.
Those saying conditions have worsened fell to 17.5 percent from 21.6 percent. Consumers claiming jobs are “hard to get” decreased to 26.5 percent from 30.3 percent. Those saying jobs are “plentiful” rose to 18.0 percent from 16.6 percent.