As war fears fade, optimism returns

Joan Gunin, Don Hogsett, June 2, 2003

Now that the war with Iraq has settled, Americans are betting that business conditions and the job outlook will improve over the next six months, and consumer confidence climbed in May to its highest level in six months, The Conference Board reported.

The bellwether gauge of consumer sentiment — widely viewed as an indicator of future consumer spending — rose by 3.5 percent to a level of 83.8, up from 81.0 in April.

The move wasn't as big as last month's big 31.9 percent surge, and it wasn't as much as economists had hoped for — an even bigger gain of almost 5 percent, to a level of 84.9 percent — but it worked like a charm on Wall Street, where it triggered a rally in the Dow Jones Industrial Average of more than 100 points when the news came out last May 27.

Wary consumers continue to focus on the jobs outlook and are feeling somewhat better about conditions going forward, the business think tank reported.

Consumers continue to take a dim, and deteriorating, view of current business conditions and the jobs picture, The Conference Board noted. But looking six months out, their outlook starts to improve. Weighing current business conditions, consumers pulled in their horns somewhat, and the number who describe business conditions as "bad" rose to 28.4 percent from 23.9 percent last month. However, the number who think conditions will improve registered a significant improvement, jumping up to 22.8 percent from 18.9 percent.

The same pattern held true for the crucial jobs outlook. Consumers see current conditions deteriorating, and the number who reports jobs are hard to get jumped to 32.6 percent from 29.4 percent. But six months out, the number who expect more jobs to become available jumped up to 17.8 percent from 16.4 percent.

Consumer confidence by region

New England 28.5%
Middle Atlantic 1.8
East North Central -5.2
West North Central 34.7
South Atlantic -4.4
East South Central 6.8
West South Central 9.2
Mountain -11.2
Pacific 3.7

Consumer Buying Plans — May
plans to purchase over the next six months

Source: The Conference Board
Homes +5.9%
Carpets -1.8
Cars +26.7
Major appliances +4.4
Vacation -0.7

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