Upbeat nation looks to 1998 Consumer confidence highest BTC since 1969, government reports

Stocks jump 123 points

Unprecedented 40.6% of respondents say jobs are 'plentiful'

December 31, 1997|By NEW YORK TIMES NEWS SERVICE

WASHINGTON -- Unruffled by Asia's crisis and buoyed by the exceptionally promising job market, American consumers approach 1998 with the most confidence about their economic future that they have expressed in nearly three decades.

"The strength of the United States economy, especially of the labor market, continues to lift consumers' spirits and bolster their expectations," Lynn Franco, associate director of the Conference Board's Consumer Research Center, said yesterday in reporting that confidence surged in December to its highest level since mid-1969.

Those calling jobs "plentiful" reached an unprecedented 40.6 percent of respondents to the monthly survey conducted for the business-supported research group.

The optimism in the survey was viewed as a strong signal that the economy would remain vibrant, partly because consumer spending accounts for a large portion of domestic growth.

The survey results also contributed to the second consecutive surge in the stock market, where the Dow Jones industrial average rose 123.56 points, or 1.6 percent, adding to a 1.5 percent gain Monday. The Dow closed yesterday at 7,915.97, and broad market indexes rose along with it.

Although financial and economic turmoil in Asia is widely expected to hurt certain parts of the economy, especially U.S. exporters, consumers seem to be regarding it nonchalantly or even as a likely benefit to them, economists said.

One reason is that lower costs loom for imported goods, reflecting the dollar's strength in relation to devalued Asian currencies and the need by South Korea and other stricken countries with faltering domestic markets to spur sales abroad.

Another curb on inflation here is the drag on a U.S. economy that has been expanding at an unsustainable pace this year, just what many believe is needed to keep the Federal Reserve from having to slow it down by raising interest rates.

Consumers, said James Annable, chief economist at First Chicago-NBD, "are putting together all these things as it pertains to them, and they're coming up with the right answer." In other words, households seem somehow to be recognizing that what economists call the terms of trade have shifted in their favor.

The Conference Board's overall confidence index jumped to 134.5 this month from 128.1 in November, with consumers' appraisal of both the present situation and their expectations for six months ahead posting substantial gains.

While the index reached 130.2 in September and has been hovering near peaks since spring, the latest reading vastly exceeded expectations and is the highest since June 1969, when it stood at 137.9.

The present-situation component of the index, a barometer of how consumers perceive their current financial security, also hit a 28-year high, climbing to 161.7 from 156.8. The expectations component of the index surged to 116.4 from 108.9, a 13-year peak.

"Consumers are the most upbeat in three decades," said Edward Yardeni and Debbie Johnson, economists at Deutsche Morgan Grenfell, in an advisory to the firm's clients.

Especially impressive, analysts said, was that 40.6 percent of those responding to the survey described jobs as "plentiful," up from 36.4 percent in November and the highest proportion since April 1969.

Only 16.8 percent, down from 17.4 percent, called jobs "hard to get," just short of the record low.

Although wages have been rising of late, consumers were not so optimistic about increases in family income during the first half of the new year. The proportion expecting higher wages eased to 27.7 percent from 29.9 percent, the survey found. But fewer households also expected incomes to drop, 5.1 percent compared with 6.6 percent in November.

Regionally, the increased confidence was concentrated in the Southeast and West Coast. Five of the nine regions, in fact, had declines, including the Middle Atlantic States, where confidence has long lagged behind the rest of the country.

At 96.5 this month, the Middle Atlantic region was down from 99.1 in November but far ahead of the dismal 76.6 of December 1996.

The latest reading for New England was 130.6, negligibly lower than 131.5 last month.

Confidence in the South Atlantic States jumped to 143.3 from 130.5 while in the Pacific States the advance was to 140.2 from 129.4.

"Consumers are clearly entering the new year extremely satisfied with ongoing conditions and have high expectations for 1998," Franco said in her statement.

Pub Date: 12/31/97

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