Confidence slowly climbing back

Don Hogsett, January 7, 2002

Raising hopes for a rebound in consumer spending as well as a turnaround in a flagging economy, consumer confidence jumped up dramatically in December, climbing 10.4 percent to a reading of 93.7.

But despite the big improvement over the low level of the past three months, the bellwether gauge of consumer sentiment was still down more than 27 percent from a year-ago reading of 128.6 in December 2001, The Conference Board reported.

Moving in lock step with rising confidence levels, consumers' plans to buy cars and homes also rose during December, the business think tank reported. Home-buying plans, whetted by historically low mortgage rates, jumped up to 4.1 percent from just 3.3 percent in November. And 7.9 percent of consumers polled said they plan to buy a car during the next six months, up from 7.1 percent last month.

The only soft spot was major appliances, where consumer buying plans dipped to 27.1 percent from 29.4 percent the prior month.

The monthly Consumer Confidence survey is based on a representative sample of 5,000 households nationwide.

"The deterioration in current economic conditions appears to be reaching a plateau, led by a stabilizing employment scenario," said Lynn Franco, director of The Conference Board's Consumer Research Center. "Consumers' short-term optimism is no longer at recession levels, and the upward trend signals that the economy may be close to bottoming out and that a rebound by mid-2002 is likely."

Consumers' appraisal of current economic conditions was slightly more positive than last month, with 17.0 percent rating current conditions "good," up from 16.8 percent in November. Offsetting that somewhat, the number who think current conditions are "bad" increased to 21.7 percent from 20.7 percent a month ago.

The all-important employment outlook, with its big impact on consumer spending, improved slightly as well, and those who reported that jobs are plentiful edged up to 17.6 percent from 17.5 percent a month ago. Those who say that jobs are hard to get declined to 21.8 percent from 22.7 percent.

And the jobs picture is expected to get much better, consumers said. Currently, 16.1 percent of consumers expect more jobs to become available in the next six months, up from 14.4 percent in November. The number who expect fewer jobs to become available fell substantially, to 11.6 percent from 16.9 percent. When it comes to income expectations, 20.7 percent expect a gain, down from 22.0 percent in November.

Looking ahead, consumers are more optimistic about economic prospects six months from now. The number who expect an improvement in business conditions rose sharply, to 22.2 percent from 17.7 percent a month ago. Correspondingly, the number who expect conditions to worsen fell to 11.6 percent from 16.9 percent.

Consumer confidence by region

New England 17.8
Middle Atlantic 4.7
East North Central 1.3
West North Central -2.8
South Atlantic 13.3
East South Central 5.6
West South Central 10.5
Mountain -2.6
Pacific 6.3

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