- The Washington Times - Tuesday, June 24, 2003

NEW YORK (AP) — Consumers are feeling increasingly confident in the future health of the economy, but that optimism is tempered by doubts about current business conditions, a private research group reports.

The New York-based Conference Board said yesterday its Consumer Confidence Index edged back to 83.5 in June from a revised 83.6 in May after two consecutive months of increases. Still, the reading was better than analysts’ projected reading of 82.

Economists called the report modestly positive and said it shows that consumers, continuing to exhibit the optimism that followed the end of the war in Iraq and buoyed by reports of coming tax cuts, see better times ahead.

“It just shows that the consumer sector may continue to be a pillar and foundation for growth in the overall economy going forward,” said Patrick Fearon, an economist with A.G. Edwards & Sons Inc. in St. Louis.

Mr. Fearon said a disparity between consumers’ assessment of current conditions and more positive future expectations often signals coming improvements in the economy.

“It’s obviously good news about consumer spending, not blockbuster numbers, but it does indicate firm underpinning for the economy. It is good for second-half consumer spending growth,” said Sherry Cooper, chief economist for BMO Nesbitt Burns in Chicago.

The confidence index is watched closely by economists because consumer spending accounts for two-thirds of the domestic economy. Consumers’ willingness to continue their purchases have powered the economy through the current downturn, even as businesses have sharply limited spending.

“The recent turnaround in the stock market and an easing in unemployment claims should keep consumer expectations at current levels and may signal more favorable economic times ahead,” said Lynn Franco, director of the Conference Board’s Consumer Research Center.

Miss Franco said yesterday’s report indicates that consumers are mixed in their assessment of business and labor market conditions.

Reflecting that, the report’s present situation index declined to 64.9 in June from 67.3 in May. The number of consumers who say business conditions are good and jobs are plentiful both fell.

But the report’s measure of consumer expectations for the next six months rose to 95.9, up from 94.5 in May, offsetting the declines in optimism about the current economy.

Those who say they expect improving business conditions rose to 23.9 percent from 22.8 percent, while the number expecting conditions to worsen fell.

The Conference Board’s indexes are derived from responses received through June 17 to a survey mailed to 5,000 households in a consumer-research panel. The results are from a partial sample of at least 2,500 respondents.

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