MARKET TRENDS: Consumer Confidence Rises in January

Anticipation of improved conditions in business and the job market caused consumer confidence to inch up in January.


Lynn Franco, Director of The Conference Board Consumer Research Center, reports that “consumers have begun the year in better spirits. As a result, the Index is now near levels not seen since last spring (May 2010, Index 62.7). Consumers rated business and labor market conditions more favorably and expressed greater confidence that the economy will continue to expand and generate more jobs in the months ahead. Income expectations are also more positive. Although pessimists still outnumber optimists, the gap has narrowed.”


What is consumer confidence? It is measured in terms of the public's optimism about the economy. Consumer confidence is also measured in part by how much people are spending and saving.


Each month The Conference Board surveys 5,000 U.S. households. The survey asks for rankings on:


Current business conditions
Current employment conditions
Projected Business conditions
Employment conditions for the next six months
Total family income for the next six months
In January, consumers' short term outlook was higher than the month prior. According to the Conference Board, "Those anticipating an improvement in business conditions over the next six months increased to 19.0 percent from 16.8 percent, while those anticipating business conditions will worsen decreased to 11.3 percent from 11.8 percent. Consumers were also more optimistic about the job market. Those anticipating more jobs in the months ahead increased to 16.0 percent from 14.2 percent, while those expecting fewer jobs declined to 17.5 percent from 19.2 percent. The proportion of consumers expecting an increase in their incomes rose to 11.4 percent from 9.9 percent."


Consumer spending also rose in the latest survey, as reported by the Commerce Department. This was the sixth month of gains, and the highest it has been in four years, according to Business Week.


Unemployment, however, remains high. In the last monthly report from the U.S. Bureau of Labor Statistics, unemployment is 9.4 percent nationally. This is a slight decline of .4 percent from December. Rises in employment were seen in the healthcare and leisure and hospitality industries only.


"There are definitely hopeful signs of sustained recovery in 2011,” Federal Reserve Bank of Atlanta President Dennis Lockhart said yesterday, “That said, I believe it is a bit early to declare victory, and, to be sure, employment is nowhere near acceptable levels.”


Repair to the ailing job market should have far reaching effects, namely on spending and the housing market.


Carla Hill Realty Times February 1, 2011