- The Washington Times - Wednesday, December 29, 2004

Consumer confidence rebounded strongly this month, bolstered by improving markets for jobs and stocks and a big drop in oil and gasoline prices, the Conference Board reported yesterday.

The nearly 10-point jump in the board’s confidence index to 102.3 was the largest in more than a year and came after four straight months of decline. Consumer spending also picked up during the month, particularly as Christmas approached, providing a robust end to a slow-starting holiday sales season.

“The continuing economic expansion, combined with job growth, has consumers ending the year on a high note,” said Lynn Franco, a research director at the New York business-research group.

The surge in confidence should put the economy on solid footing going into the new year, she said.

Consumer perceptions of the job market and overall economic conditions both improved significantly during the month. Nearly one in five consumers said jobs were plentiful — up from 17.1 percent in November — while those who said jobs are hard to get declined to 26.4 percent.

The unexpectedly upbeat confidence report added momentum to the stock market, which is enjoying a solid year-end rally. The Dow Jones Industrial Average rose 78 points to 10,855.

Stocks had languished all year until November, but the gains since then have lifted the Dow and other major stock indexes to levels not seen since before September 11, 2001. They also promise to provide a second straight year of positive returns — something Wall Street has not seen in five years.

The market upturn has not gone unnoticed by consumers.

“The consumer is in touch with the positive economic signs we have seen lately,” said Dick Rippe, chief economist with Prudential Securities.

A dramatic fall in oil prices from more than $55 a barrel just before the election to about $42 yesterday has given a lift both to stocks and consumer spirits. The average price of gas at the pump has declined for eight straight weeks and is about $1.79 a gallon.

In addition, consumers seem to sense a pickup in job conditions, though that has not been as apparent in other indicators of employment conditions.

Job hunters who use the Monster.com Web site are reporting increased job offers and decreased periods of unemployment.

One job seeker yesterday said that she was having difficulty deciding between two good job offers, while another mulled the possibility of testing the market and quitting her job. Complaints from those having difficulty finding jobs were down substantially from a year ago on Monster.com chat boards.

Increased opportunity in the job market translates into more upbeat plans to spend, according to the Conference Board. It found that more consumers expect their incomes to rise in the next six months, and a larger percentage expect to buy appliances, automobiles and houses.

Shoppers may be getting a head start. Sales at retailers surged in the final days before Christmas, and Amazon.com Inc., the world’s largest Internet retailer, said it experienced a single-day record number of orders.

Visa USA reported a 32 percent spike in spending last week, and a 15 percent rise in credit card spending over last year during the holiday season — a spending binge that could lead to a debt hangover in the new year.

“Everything really is improving,” said Tim Rogers, chief economist at Briefing.com in Boston. “Labor demand certainly has improved over the last several months.”

Confidence among business executives who are responsible for hiring has surged since the election, leading to an increase in hiring plans, according to a survey by Chief Executive magazine.

“The executive perception of the political climate seems to explain much of the jump in confidence this month,” said William J. Holstein, the magazine’s editor in chief, noting that most chief executive officers supported President Bush’s re-election.

“The assurance of a White House favorable to business will allow CEOs to forge ahead in the coming months,” he said.

Richard Yamarone, economist with Argus Research Corp., doubted the significance of the upsurge in consumer confidence, however.

“It really should come as no surprise that consumers are upbeat during the holiday season,” he said, attributing most of the increased bullishness to falling gas prices and rising stock prices.

Consumers are not doing as well as they might think, taking inflation into account, he said.



Click to Read More

Click to Hide