The much anticipated latest reading on consumer confidence, which was issued shortly after today’s market opening, surpassed consensus expectations. Indeed, the Consumer Confidence Index, a monthly survey based on a probability design random sample conducted by The Conference Board, rebounded significantly in February after declining during the first month of the New Year.
Specifically, the Consumer Confidence Index rose from 58.4 in January to 69.6 in February. This latest reading is encouraging, as the consumer accounts for the largest portion of the nation’s economic output. It also is an indication that the initial shock effect caused by the “fiscal cliff” uncertainty and payroll tax hikes appears to have abated. The latest data allay some of the recent concerns about shoppers' ability and willingness to spend in coming months. This, combined with the rapidly improving U.S. housing market, gives some confidence that the recent fourth-quarter GDP contraction was likely a one-time event and the rate of economic expansion should pick up as 2013 unfolds.
According to Lynn Franco, Director of The Conference Board Consumer Research Group, “Consumers’ assessment of current business and labor market conditions is more positive than last month.” Income expectations, which turned rather negative at the start of the year, improved modestly this month. Too, recent prices at both the producer and consumer levels remain rather tame, which should also help the cause of the consumer in the month ahead.
A closer examination of the latest report also unveils some positive developments. Those claiming business conditions are “good” rose to 18.1% in February from 16.1% in the prior month, while those claiming business conditions are “bad” dropped to 27.8% from 28.4%. Too, the survey showed that consumers’ appraisal of the jobs market was more upbeat than it was in January, as those saying jobs are “plentiful” increased to 10.5%, from 8.5%. Moreover, those same consumers expecting business conditions to improve over the next six months increased from 15.6% in January, to 18.9% in the current month.
All in all, the latest consumer assessment was much more favorable than those of the last few months and provides some hope that the consumer will be willing to spend in the near term, even with a budget deal on Capitol Hill still very much in doubt. Such a scenario would be a big boost for an economy that is currently moving forward at a very pedestrian pace.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.