Consumer confidence improved slightly in January on a strengthening job market, but consumers also appeared concerned that labor conditions could worsen in the future, according to a survey released Tuesday by a private research group.
The Conference Board said that its Consumer Confidence Index edged up to 110.3 in January from a revised 110.0 in December. Analysts had expected a reading between 110.0 and 110.5.
The January increase was "fueled primarily by a more favorable job market," said Lynn Franco, director of the board's consumer research center. However, "looking ahead ... consumers are not as optimistic as they were in December," she said.
As a result, the index suggests just "moderate improvement" in economic growth in early 2007, Franco said.
Back Seat To Fed Meeting
"Consumers seem to be feeling good about the current situation, but there's concern about the future," Gary Thayer, an economist at A.G. Edwards & Sons. "The good employment situation and lower energy prices make people feel that the economy is doing well now, but there are still some lingering worries about housing and where energy prices might go in the future."
According to Omer Esiner, a market analyst at Ruesch International, the consumer confidence number is likely to take a back seat to the Federal Open Market Committee meeting, which began today.
The interest-rate setting FOMC is widely expected to hold rates steady at 5.25% for the fifth-straight meeting, when it makes its announcement on Wednesday afternoon.
"I think the Fed will maintain its data-dependent outlook, keeping its bias more or less neutral for the foreseeable future," Esiner said.
"The risk is that if they hint one way or the other, the market could move, but I'm expecting a steady outlook from the Fed, and I don't think that will move the market very much," he said.
In an interview on CNBC, LaSalle Bank Chief Economist Carl Tannenbaum said he expects the Fed will keep a close eye on labor market trends.
"We've had great productivity growth the last few years," Tannenbaum said. "The risk is that it may taper off to a more normal historical level, which would mean that we cannot operate at the same low level of unemployment without beginning to stress unit labor costs. That is the risk for the Fed. That's why they need to remain quite conservative as we move through the first part of this year."
The central bank lifted the overnight rate by a quarter-point 17 times between June 2004 and June 2006. Since that time the Fed has been on hold and investors have been trying to gauge when the pause might end.
A recent string of stronger-than-forecast economic data reports have caused some economists to predict that the Fed could be more inclined to raise rates in the near future, while others expect they will leave rates on hold for most of the year.
Chain Store Sales Rose 1.6%
Earlier, Redbook Research said U.S. chain store sales rose 1.6% in the first four weeks of January from the prior month.
The increase in the index was in line with the targeted increase, according to the report.
The Johnson Redbook Index also showed seasonally adjusted sales in the four-week period rose 2.7% compared with January 2006, versus a 2.8% target.
Redbook said on an unadjusted basis, sales in the week ended Jan. 27 were up 2.7% from the same week in 2006, after a 2.8% increase a week ago.