Consumers' confidence edges lower But that gauge and expectations index stay comparatively high

March 26, 1997|By BLOOMBERG NEWS

NEW YORK -- Americans' confidence in the economy slipped in March, and prospects for future months dimmed as well, although both gauges stuck close to recent months' high levels.

The Conference Board said yesterday that its overall index of consumer confidence fell to 118.5 in March from a revised 118.9 in February, the highest level in almost eight years. Last month's index was originally reported as 118.4. Economists surveyed by Bloomberg News had expected a reading of 117.7 for this month's index.

Meanwhile, the index measuring consumer expectations over the next six months slid a half point, the New York-based research group said.

"The message from consumers is that both business and employment conditions will remain upbeat through the spring and the summer," said Lynn Franco, associate director at the Conference Board's Consumer Research Center.

Yesterday's report came as the Federal Reserve's policy-setting Open Market Committee voted to raise overnight borrowing costs for banks by a quarter point, to 5.5 percent.

"From the Fed's point of view, confidence is a sign that the economy is not about to slow down," said Bill Cheney, chief economist at John Hancock Financial Services in Boston. "Each new release gives the Fed more reason to raise rates."

The Conference Board report suggests that consumers are less upbeat about their financial prospects. Consumer spending accounts for two-thirds of economic activity. This month's index gauging consumers' expectations for the next six months fell to 101.4 from a revised 101.9. The index tracking consumers' assessment of present conditions fell to 144.1 this month from a revised 144.3.

Before February, the last time the overall index was higher was July 1989, when it registered 120.4.

If consumers continue to spend at a rapid pace and the economy retains last quarter's momentum, that raises the risk of quicker inflation.

Economists now expect the economy to grow at a 3 percent or better rate this quarter after expanding at an unexpectedly high 3.9 percent clip in the last three months of 1996.

The Conference Board also found fewer respondents than last month expect their incomes to rise over the next six months. The indexes measuring consumers' plans to buy a home fell, even though starts of new U.S. housing construction registered a 12.2 percent jump in February.

But the number of consumers planning to purchase automobiles over the next six months rose, and the number planning to buy major appliances fell.

Pub Date: 3/26/97

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