Consumer confidence rises to highest in a year
NEW YORK - A widely watched barometer of consumer confidence surged in February to its highest level in a year as Americans took note of improving job prospects among friends and family and falling unemployment, which is now at a three-year low.
NEW YORK - A widely watched barometer of consumer confidence surged in February to its highest level in a year as Americans took note of improving job prospects among friends and family and falling unemployment, which is now at a three-year low.
The brighter assessment released Tuesday by a private research group reflected a more upbeat attitude for the nation generally as the economy picks up. That is a boon for President Obama as he seeks reelection.
Polls, including a recent Associated Press-GfK survey, show the Democratic incumbent is beginning to benefit politically from improved views of the economy. "The economy is getting momentum. Clearly, shoppers are more optimistic about their job prospects," said Amna Asaf, economist at Capital Economics.
But confidence is still below the level of a healthy economy, and trouble could lie ahead. Rising gas prices could sully shoppers' mood and derail the economic recovery. There are also fears about a showdown with Iran and the festering European debt crisis. Those worries could hurt demand for U.S. imports and make American companies pull back in hiring.
The confidence index is closely watched because consumer spending constitutes 70 percent of U.S. economic activity. The big question mark is the price of gasoline, which has climbed 20 cents per gallon since the confidence survey concluded two weeks ago. The price of gas is a big issue because it has an immediate effect on shoppers' pocketbooks, particularly low- to middle-income households that are already squeezed by higher costs for basics such as food. The average U.S. price of a gallon of gasoline was $3.69, according to the Lundberg Survey of fuel prices released Sunday.
The Conference Board's Consumer Confidence Index stands at 70.8, significantly higher than the expected 63. A reading of 90 or above indicates a healthy economy. But the index has not reached that level since December 2007.
The Conference Board survey of consumers, conducted from Feb. 1 through Feb. 15, showed shoppers are feeling better about the job market. Those anticipating more jobs in the months ahead increased to 18.7 percent from 16.4 percent, while those anticipating fewer jobs declined to 16.9 percent from 19.1 percent. The government reported that 243,000 jobs were added in January, pushing the unemployment rate to 8.3 percent, the lowest in three years.
Separately, the Commerce Department said U.S. businesses slashed spending on machinery and equipment in January after a tax break expired. That pushed orders down.