Consumer Confidence Hits Three-Year High on Economic Optimism

Consumer confidence surged in February to its highest level in three years as Americans grew increasing confident that the economy -- and their income prospects -- will improve in the months ahead.

The index of consumer sentiment, which was released Tuesday by the Conference Board, climbed 5.6 points to 70.4 in February. A Bloomberg survey had expected it to rise just slightly, to 65 from 64.8 in January. The index's previous high was in 76.4 in February 2008.

Lynn Franco, director of the Conference Board's Consumer Research Center, said consumers continue to sense a strengthening economy and improving financial conditions for themselves, if not a substantial improvement in the job market.

Less Optimism About Employment Conditions

"The Consumer Confidence Index is now at a three-year high, due to growing optimism about the short-term future. Consumers' assessment of current business and labor market conditions has improved moderately, but still remains rather weak," Franco said, in a statement. "Looking ahead, consumers are more positive about the economy and their income prospects, but feel somewhat mixed about employment conditions."

The index's key components also progressed in February. Those claiming current conditions are "good" increased to 12.4% in February from 11.3% in January, while those claiming business conditions are "bad" was unchanged at 39.6%.

Those expecting an improvement in business conditions over the next six months increased to 24.4% in February from 24% in in January, while those expecting business conditions to worsen decreased to 10.4% from 12.2%.

On future job prospects, the results were mixed. Those anticipating more jobs in the months ahead dipped to 19.8% in February from 20.8% in January, while those anticipating fewer jobs decreased to 15.4% from 21.2%.

Those saying jobs are "plentiful" inched higher to 4.9% in February from 4.6% in January, while those saying jobs are "hard to get" decreased to 45.7% from 47%.

The number of consumers expecting an income increase rose to 17.3% in February from 15.3% in January.

Economists monitor the index because, historically, rises in consumer confidence are directly correlated with increases in consumer spending. Moreover, consumer spending has accounted for a large portion of U.S. GDP. Hence, if confidence rises, and a trend forms, that most likely means good things are ahead for corporate revenue and earnings. Falling confidence, however, signals the opposite.

In Sync with Economic Conditions

February's consumer confidence report -- the first using a new survey provider -- is a positive sign for investors. Consumer confidence continues to improve along with with U.S. economic conditions. Americans sense that business conditions, as reflected by both adequate to good quarterly corporate earnings and the stock market's rise, are improving, and that the U.S. economy is growing at a decent pace.

However, consumers are understandably more cautious regarding the job market. They sense that layoffs are subsiding, but they still aren't totally convinced that a period of job growth has started. Provided that the U.S. labor market continues to heal in the quarters ahead, consumer confidence should continue to rise and support U.S. GDP growth in 2011.

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

Add a Comment

*0 / 3000 Character Maximum

18 Comments

Filter by:
well2

Where do they get this information in this article! If Consumer confidence rose its because goods and merchandise @ the stores ,supermarket etc, have lower their prices in other words if consumers BOUGHT MORE its because of "SPECIALS" "SALE TODAY" "MARKDOWN PRICES" "REDUCED 50%" thats the only time I see consumers running to the stores or BUYING in this economy!

March 04 2011 at 1:43 PM Report abuse rate up rate down Reply
darkhrse4011

If you ever had any doubts about Joe lazzaro being on the Wall Street dirty payroll leave them here with this ridiculous and offensive article ....this snake oil writer is a disgrace to journalism and an insult to the subscribers of AOL!

February 23 2011 at 5:47 AM Report abuse +3 rate up rate down Reply
fred

Watch this rearview mirror inspired number to plummet in the months ahead........

February 23 2011 at 2:18 AM Report abuse +4 rate up rate down Reply
plainscout

I believe this to be the Last Month of the rise of these Numbers at least for the rest of the year due to Events far beyond the control of those in Power

February 22 2011 at 8:57 PM Report abuse +2 rate up rate down Reply
laurargriego

I can't believe what is being said, the only reason that consumer confidence has gone up is because people are getting their refunds from federal and state and finally have money to buy the necessary or the last hoorah before they loose it all. And due to the misfortune of others because of the winter storms, business's are doing better, but that's temporary. Wake up America!!!!

February 22 2011 at 5:42 PM Report abuse +3 rate up rate down Reply
robinno8

It is amazing that people really believe it is getting better out there. Maybe there are people that love to hear lies. Customer Service is really at a low as well.

February 22 2011 at 5:35 PM Report abuse +5 rate up rate down Reply
Frank

Lets see....no job but still surviving using savings (hope they last), house is underwater (thank you "Best and Brightest" of Wall Street).....yep...things are certainly looking up.

February 22 2011 at 4:28 PM Report abuse +3 rate up rate down Reply
flycozy

Joe have you been mixing your medication again?? Get the heck out of Wall Street’s stock market casino soon because soon all the lies, lying and liars will stop working including you Joe. This market is without questions propped up with fiat Fed money.

February 22 2011 at 4:06 PM Report abuse +5 rate up rate down Reply
jkennedy806

Richard I agree with you, he obviously must be in a different surreal life than the rest of US. I will have to admit when the Stock market Wall street tanks I do feel happy. Not to crazy about the oil price however.

February 22 2011 at 3:58 PM Report abuse +3 rate up rate down Reply
RichardPoole

Its hard to believe this writer has any concept of the reality of the american consumer. Confidence in what? This article must be a plant to try to convince us that we are all wildly confident in this economy,sorry , but is this writer brain dead or what.

February 22 2011 at 3:51 PM Report abuse +5 rate up rate down Reply