Consumer confidence at record

The Economy

High employment gives Americans assurance to spend

Index rises to 144.7

More evidence that the expansion will continue

January 26, 2000|By BLOOMBERG NEWS

NEW YORK -- U.S. consumers are starting the year more confident about the economy than ever before and ready to push the record-bound expansion well into 2000, a report yesterday indicated.

Abundant jobs, a rising stock market and a Jan. 1 that passed without major computer crashes helped drive the consumer confidence index to 144.7 in January, its highest ever, Conference Board figures showed.

"It's the consumer that powers this economy, and this is evidence that there's more fuel in this economic expansion," said Richard Yamarone, senior economist with Argus Research Corp. "Everyone is employed. When you have a job, you are confident. When you're confident, you spend."

The last high for the index was 142.3 in October 1968, when federal spending on the Vietnam War and social programs fueled the longest expansion ever. The economy is on the verge of a record expansion, fueled by consumer spending and increased worker productivity.

Sales of previously owned houses in 1999 reached a high of 5.2 million last year, up 4.6 percent from the record 4.97 million set in 1998, the National Association of Realtors yesterday said in a report that was inadvertently released early. It was the first time annual sales have risen above 5 million and was the fourth consecutive yearly record.

The report also showed that sales dropped 1.4 percent in December to an annual pace of 5.06 million. That level was down 5.2 percent from a year earlier, a sign higher mortgage rates may be cooling demand.

Job security formed the backdrop for the confidence report, which surprised analysts expecting a bigger effect from higher interest rates and the recent volatility in stock prices. Economists had forecast a level of 142.1 this month.

The increase in the consumer confidence index followed a reading of 141.7 last month, which had been the second highest ever. "The rise looks even more spectacular in light of the 11 points added to the index in November and December," said Christopher Low, chief economist at First Tennessee Capital Markets in New York.

The share of respondents who saw jobs as plentiful rose to its highest ever, 54.2 percent, from 51.8 percent in December, the business research group said. The share seeing jobs as hard to get fell to a record-low 11.3 percent.

There's been no better time than the present, the private business group reported. The assessment of current conditions jumped to its highest ever, 182.4, from 181.7 the month before, yesterday's report showed. A gauge of expectations for the next six months rose to 119.7, the highest reading in 16 years.

The Conference Board surveys 5,000 households and uses 1985 as the starting point of 100.

The report added to speculation that Federal Reserve policy-makers will raise the overnight bank lending rate Feb. 2 to cool off the economy. "If the index remains at its January level, it suggests consumer spending will rise at a 6 percent rate, far too fast for the Fed," said economist Ian Shepherdson of Valhalla, N.Y.

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