Consumer confidence rose to its highest level in five-and-a-half years amid optimism that the nation’s economy is creating enough jobs, a private research group said Tuesday.
The New York-based Conference Board said that its Consumer Confidence Index rose to 112.5, up from a revised 110.2 in January. Analysts had expected the reading to be 109.
The February index was the highest since August 2001, when the reading was 114, indicating that consumers will continue to fuel the nation’s economic growth in the near future.
In a statement, Lynn Franco, director of The Conference Board Consumer Research Center, said that “improving present-day business conditions and an easing in the proportion of consumers claiming jobs are hard to get have combined to lift consumers’ spirits.”
“All in all, it appears that the pace of economic growth exhibited in the final months of 2006 has carried over into early 2007 and may have even gained a little momentum,” she added.
The Present Situation Index, which measures how shoppers feel now about economic conditions, increased to 139.0 from 133.9. The Expectations Index, which measures consumers’ outlook in the next six months, edged up slightly to 94.8 from 94.4 last month.
Economists closely monitor consumer confidence because consumer spending accounts for two-thirds of all U.S. economic activity
The upbeat report from the Conference Board came amid largely sober news about the global economy, which dragged down the stock market. In late morning trading, the Dow Jones industrial average dropped 142.28, or 1.13 percent, to 12,489.98 as stock markets around the world slipped when worries rose that the U.S. and Chinese economies are cooling.
A warning from former Federal Reserve Chairman Alan Greenspan Monday that the U.S. economy may be headed for a recession also dampened investors’ moods.
On Tuesday, the Commerce Department that orders for durable goods in January dropped by the largest amount in three months exacerbated worries about the U.S. economy, as did a Standard & Poor’s index showing single-family home prices across the nation were unchanged in December.
The National Association of Realtors announced Tuesday that sales of existing homes rose in January by the largest amount in two years, but it also reported that median home prices declined for a sixth straight month.
“We have had a soft patch of data this month. It shows that the economy is still growing but at a below average rate,” said Gary Thayer, chief economist at A.G. Edwards & Sons Inc.
Thayer said he doesn’t expect consumer sentiment to drop off unless unemployment increases significantly, however.
The Conference Board’s consumer confidence report — derived from responses through February 20 — said that consumers who believe that jobs are “hard to get” declined to a five-and-a-half year low.