Consumer Confidence at 17-Year High

The Conference Board, New York, said its consumer confidence barometer hit its highest level since the turn of the century.

The Board’s Consumer Confidence Index jumped 125.9, up from 120.6 in September. The Present Situation Index increased from 146.9 to 151.1, while the Expectations Index rose from 103.0 last month to 109.1.

“Consumers’ assessment of current conditions improved, boosted by the job market which had not received such favorable ratings since the summer of 2001,” said Lynn Franco, Director of Economic Indicators with The Conference Board. “Consumers were also considerably more upbeat about the short-term outlook, with the prospect of improving business conditions as the primary driver. Confidence remains high among consumers, and their expectations suggest the economy will continue expanding at a solid pace for the remainder of the year.”

“Consumer confidence has been on a tear for much of the past year, having taken off immediately after the presidential election and building on those gains throughout the year,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C.

But Vitner noted the timing of the acceleration in consumer confidence, and the coincident upswing in the stock market, the improvement in consumer confidence, has been viewed “somewhat skeptically,” as has the improvement in many other soft economic indicators. “The hard data has vindicated the improvement in the soft data, with real GDP climbing at a 3 percent plus pace for the past two quarters and the unemployment rate tumbling to just 4.2 percent,” he said. “With confidence up further in October, consumers see little to fear in the immediate economic horizon.”

The report said consumers’ appraisal of present-day conditions improved in October. The percentage saying business conditions are “good” increased from 33.4 percent to 34.5 percent, while those saying business conditions are “bad” rose marginally from 13.2 percent to 13.5 percent. Consumers’ assessment of the job market was more upbeat. The percentage of consumers stating jobs are “plentiful” increased from 32.7 percent to 36.3 percent, while those claiming jobs are “hard to get” decreased slightly from 18.0 percent to 17.5 percent.

Consumers’ optimism about the short-term outlook also rose in October. The percentage of consumers expecting business conditions to improve over the next six months increased from 20.9 percent to 22.2 percent, while those expecting business conditions to worsen decreased from 9.6 percent to 6.9 percent.

Consumers’ outlook for the job market, however, was somewhat less favorable than in September. The proportion expecting more jobs in the months ahead decreased marginally from 19.2 percent to 18.9 percent, however, those anticipating fewer jobs declined from 13.0 percent to 11.8 percent. Regarding their short-term income prospects, the percentage of consumers expecting an improvement decreased marginally from 20.5 percent to 20.3 percent, however, the proportion expecting a decrease declined from 8.6 percent to 7.4 percent.