Consumer confidence in US jumps the most for 12 years
The New York-based Conference Board’s consumer confidence index increased to 81 from a reading of 61.4 in March. The almost 20-point jump was the biggest since March 1991, the month marking the end of the previous war with Iraq.
More people said they expect improved conditions six months from now, setting the stage for stronger spending. A sustained increase in consumer confidence may help generate momentum for an economy that’s grown at an annual rate of less than 2% in each of the last two quarters, economists said.
“This is an encouraging sign that the economy is going to show a post-war rebound,’ said James O’Sullivan, an economist at UBS Warburg LLC in Stamford, Connecticut.
Stocks rose after the report. Economists had forecast an index of 70 this month after a previously reported March reading of 62.5, based on the median of 62 forecasts in a Bloomberg News survey. The March reading was the lowest since October 1993.
The index rose to 81.1 with the defeat of Iraq in March 1991, helping mark the end of a recession. The surge this month was driven by increases in both expectations and consumers’ assessments of present conditions. There’s “a very significant difference” between then and now, said Delos Smith, a Conference Board economist. After the Gulf War in 1991, “the present situation didn’t move; it was all expectations,” Smith said.
Now, “we’re in much better overall shape.” Other economists aren’t so optimistic. Rudolf Thunberg, an economist at Reid Thunberg & Co in Westport, Connecticut, said he’s “sceptical that it will last.” Thunberg’s forecast of 80 was the highest in the Bloomberg survey. The example following the previous war with Iraq shows that “the post-war euphoria tends to fade and the weak labour market is likely to keep consumers cautious.”
After the end of the last recession in March 1991, a period dubbed the jobless recovery, the post-war rise in confidence proved short-lived and the index slumped to a low of 47.3 by February 1992.
The component of the confidence index that tracks consumer expectations for the next six months rose to 84.8 from 61.4, also the biggest gain since March 1991. A gauge of optimism about the present situation rose to 75.3 this month from 61.4 in March, the biggest gain in more than a year.
The Dow Jones Industrial Average rose 38 points, or 0.4%, at 10.25am New York time. The Nasdaq Composite Index increased 13 points, or 0.9%.
A separate report from the Labour Department showed first-quarter labour costs rose the most in 14 years as employers paid more for benefits. The employment cost index increased 1.3%.
