Consumer confidence is rising, and that means more spending -- and higher prices -- are likely on the way. If you've been scanning the financial headlines this week, you might have noticed that the Consumer Confidence Index climbed to 60.6 in January, up from 53.3 in December. This is far higher jump than the modest increase to 53.5 that analysts had expected.

But why is it important, and what does it mean for your wallet? Here's what you need to know:
  • Consumers are feeling better: The index, which surveys 5,000 U.S. households, measures consumers' optimism about the economy. January's reading means we're feeling better, although we still have a ways to go. (A good reading is usually considered 90 or above, and at the moment, pessimists still outnumber optimists.) "What this means, in English, is that it's no longer just egghead economists who think that better times are ahead. The average American consumer doesn't think things are so hot right now, but thinks that in a few months, not only will the recession be over, but it will no longer feel like we're in a recession," says Ken Goldstein, an economist at the Conference Board, which manages the index.
  • More spending may be on the way: When consumers are feeling confident, they tend to open their wallets more. There's no way to predict for sure that this will happen, but that's the historical trend. Goldstein says that we may really start to see this as we move into March and April. "There is at least some evidence that there is a reason to have more faith, and more confidence, which means people may spend more money. If they do that, there will need to be more stuff to spend that money on, and that means more jobs. That really starts the ball rolling in a positive direction."
  • Expect more jobs, less discounts: Unemployment remains at the top of economists' minds right now. As Goldstein says, "the top three things on minds right now are one, jobs, two, jobs, and three, jobs." So it's certainly a relief to hear that we may see some marked progress in that area as we head into the spring and summer. Hopefully that will cushion what I'm about to tell you next (and it should, because jobs are central to the health of the economy): You may start seeing less red tagging at your favorite retailers. Now that the holidays are over, Goldstein thinks the big discounts will shrink. "As we move into April and May, it's not that we will necessarily see a big spike in [retailer] sales, but sales won't come at the expense of 40% or 50% off. Retailers will not only be able to make a sale, but make money on the deal." That may be bad news for your budget, but it's good news for the economy.

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26 Comments

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cartra

I BOUGHT A BUNCH OF SEX TOYS TO MAKE MYSELF FEEL BETTER AND HELP THE ECONOMY. FUNNY THOUGH, I ONLY FEEL GOOD FOR ABOUT TEN MINUTES! THEN I THINK ABOUT GOING BROKE AND GOOD FEELING IS GONE. LOL

January 27 2011 at 1:53 AM Report abuse +2 rate up rate down Reply
Pope of Truth

I think people have spending cycles...even when they are struggling. They just go buy stuff beyond bread and electric even thoough they really shouldn't. I think bad winter weather gives people an excuse to spend...they buy more than they normally would if they think they're going to be stranded...it's excusable to the family to buy that generator (you always really wanted) just in case and in the name of safety. Next month everyone will be biting the bullet to pay their bills.

January 27 2011 at 12:58 AM Report abuse rate up rate down Reply
Kleestard

New consumer confidence means it's time to jack the price of food and fuel up.

January 26 2011 at 11:09 PM Report abuse +2 rate up rate down Reply
BIGSMOKE

Jean, You are sooooo wrong. President Obama and and his czars will be featured in a new Lost in Space feature... The liberal socialist playbook never changes...

January 26 2011 at 10:40 PM Report abuse +1 rate up rate down Reply
darinw40@mail.com

I have gone to a burn phone, went back to dial up, shut off cable, went to state minimum car insurance, took our Christmas Gift Money and paid off our Target Visa. using oil lamps at night to save power and now hoarding every penny I get ( THE BEST REVENGE AGAINST THIS NEW ECONOMY/GOVERNMENT)......no spending here except food and gas...and planting a Garden in spring so the grocery stores/suppliers can also kiss my arse...that's how much confidence I have in the businesses and Government of this country..

January 26 2011 at 10:10 PM Report abuse +4 rate up rate down Reply
darinw40@mail.com

Jean you are obviously "full of it" and must be a rich investor who is trying to prop up stocks...all is not well as we have no money to spend in your "New Economy"...fuel and food prices are skyrocketing...further advancing the monetary divide of the Rich vs. the poor/working class poor(this government has eliminated the middle class)...so hope you enjoy your hog heaven rich one while spewing all these lies

January 26 2011 at 9:56 PM Report abuse +1 rate up rate down Reply
dearthaircroi

Even if it was true that things are getting better , the rising price of fuel will kill any chance of a recovery . It will be cheaper to stay home and continue to collect unemployment then to get a job and pay for gas.

January 26 2011 at 9:35 PM Report abuse +5 rate up rate down Reply
DocLagos

This is such a CROCK! The only thing American consumers have to look forward to are HIGHER and HIGHER PRICES! Take your technology that was supposed to improve agricultural yields, more electricity from nuclear plants, et al, and SHOVE IT, damn crooks!!

January 26 2011 at 8:43 PM Report abuse +4 rate up rate down Reply
thepetermedic

lol and who pays attention to the so called experts BS

January 26 2011 at 8:03 PM Report abuse +4 rate up rate down Reply
topmind

It is true, there will be less discounts and more jobs. However the jobs' pay will be more in line with 3rd world countries' pay. Are you ready to compete with merchandise that cost more to ship from China, than it cost to produce it? If you paid $10, the worker probably got 4 cents, the shipper got 40 cents, the store gets $4 and the taxes take some $5 in shipping, duties, import costs, sales tax, excise and I skip some? If you are on the line, producing the same item here, you'd have to compete. How about $4 an hour in your pocket... minus Fica and income taxes.

January 26 2011 at 6:13 PM Report abuse +1 rate up rate down Reply