Consumer confidence jumps to 2-year high
Job growth, ease in prices for gas cited
NEW YORK -- Consumer confidence jumped to a two-year high in June, buoyed by an improved job market and softening gasoline prices, the New York-based Conference Board reported yesterday.
The upbeat news contrasted with early reports this week of a slowdown in retail sales in June. But economists shrugged off those disappointing figures, which were due primarily to cool weather in the South and Northeast, as a temporary setback.
The consumer confidence index, which barely budged in May, increased nearly 9 points to 101.9, up from a revised 93.1 in May. The latest reading was much better than the figure of 95 that analysts had expected.
Lynn Franco, director of the Conference Board's Consumer Research Center, said the strong improvement in current business conditions propelled consumer confidence to the highest level since June 2002, when the indicator was 106.3.
The present situation index is now 104.8, up from 90.5 in May. The expectations index, which measures consumers' outlook over the next six months, rose to 100 from 94.8.
"Looking ahead, consumers expect the economy to continue to grow at a healthy clip and to continue to generate additional jobs," Franco said in a statement. "And, with prices at the pump beginning to ease, the short-term outlook remains favorable."
The survey's cutoff for June's preliminary results was June 22, before the relative smooth transfer of power to Iraq happened.
Economists closely track consumer confidence because consumer spending accounts for two-thirds of all US economic activity.
Mark Vitner, an economist at Wachovia Corp., said he believes the recent improvement in consumer confidence largely reflects improving employment conditions.
Both Wal-Mart Stores Inc., and Target Corp. warned Monday that sales at stores opened at least a year for June would be lower than projected. The nation's retailers are set to report their June sales figures on July 8.
Vitner added, "If gasoline prices keep coming down over the summer, then the damage is limited," he said. If gas prices don't continue to decrease, Vitner believes there will be an impact on consumer spending in 2005.
Joel L. Naroff, the president and chief economist at Naroff Economic Advisors Inc., said that while he's encouraged with the consumer confidence figures, there's still plenty of uncertainty out there. "We have to see wage increases start to kick in before we see consumers feel really good," he said.
The Conference Board's report yesterday showed that consumers' assessment of current business conditions improved considerably in June. Those saying conditions are "good" rose to 25.6 percent, up from 22.2 percent.
The employment outlook remained upbeat. Those anticipating more jobs to become available increased to 19.7 percent from 18.7 percent. Those expecting fewer jobs edged down to 17.1 percent from 17.3 percent.
Analysts expect another robust job increase when the Labor Department is set to release its job figures on Friday, following three months of solid job gains. Analysts anticipate the unemployment rate to remain at 5.6 percent. But they are counting on nonfarm payrolls -- government and private employers -- to add 250,000 jobs.
The upbeat consumer confidence report propelled stocks higher.
The Dow Jones industrial average gained 56.34 to 10,413.43. Broader stock indicators also gained ground. The Standard & Poor's 500 index rose 2.85 to 1,136.20, and the Nasdaq Composite index was up 15.11 at 2,034.93. 