U.S. News

Consumer Confidence Measure Hits 2 1/2-Year High


Consumer confidence climbed to a 2 1/2-year high with people feeling even better about job prospects, the current economic climate and investment opportunities.

The improvement comes as national job growth, while slowing a bit, remains fundamentally healthy. Workers' paychecks are going further as gasoline and other prices ebb. And, interest rates -- including those on mortgages and other consumer loans -- are stable and attractive.

The pickup in consumer confidence, however, didn't help President Bush's overall standing with the public.

The president's job-approval rating in February sank to 32%, matching his lowest-ever marks, according to an AP-Ipsos poll. On the economy, 42% approved of the president's stewardship, while 55 percent disapproved, the poll said.

Democrats, now in control of Congress, accuse Bush of not doing enough to help narrow economic inequality, which has widened over the past few decades. Finding ways to close that gap between low- and high-income workers is a Democratic priority.

Consumer confidence in February clocked in at 103, according to the RBC Cash Index. That was up from a buoyant 95.3 in January and was the best showing since September 2004. The index is based on the results of the international polling firm Ipsos.

"There's a significant improvement in the way people feel about the state of the economy. I wouldn't say people are giddy, but there is a sense of a better well-being overall," said Brian Bethune, economist at Global Insight.

Housing Slump Worries

Consumers this month did express some angst about how economic conditions will unfold over the next six months, perhaps reflecting lingering concerns about the housing slump and the ailing automotive industry, economists said.

Yet, the overall confidence reading bodes well for the national economy. If consumers are in good spirits, they may be more inclined to spend sufficiently to help the economy grow at a moderate pace. Consumer spending plays a major role in shaping national economic activity.

"This certainly suggests that concerns about consumers retrenching are misplaced," said Bill Cheney, chief economist at John Hancock Financial Services.

Consumers continue to feel optimistic about the job market. This reading rose to 131.9 in February, the highest on record.

The government reported last week that the nation's unemployment rate crept up to 4.6% in January. Even with the bump-up, the rate is still low by historical standards.

Peoples' feelings about current economic conditions also improved. This reading increased to 114 in February, a five-month high.

Gasoline is now selling for $2.19 a gallon, lower than a year ago, according to the Energy Department. That's also a big break compared with the $3-a-gallon prices seen in the early summer.

With prices for energy as well as other goods settling down, inflation also has eased. That's good news for consumers' pocketbooks and wallets.

Wage Gains

Workers' wages over the 12 months ending in January grew by 4% -- considerably faster than inflation which is hovering in the 2% range. "Workers are finally making some headway," said Lynn Reaser, chief economist at Bank of America's Investment Strategies Group.

Another index tracking peoples' attitudes about buying, saving and other investment decisions, shot up to 102.4 in February, from 83.2 in January. The new reading marked a five-month high.

The Federal Reserve last week decided to give borrowers another break and held interest rates steady. The Fed's key rate hasn't budged since August. Neither has commercial banks' prime lending rate -- for certain credit cards, home equity lines of credit and other loans, which has stayed at 8.25%.

Rates on 30-year mortgages this week dipped to 6.28 percent.

Another index tracking peoples' feelings about economic conditions and their own financial prospects over the next six months dropped to 69.2 in February, suggesting consumers are somewhat apprehensive about what the future may hold. This expectations index had surged to 83.8 in January after a long period of weakness.

The overall confidence index is benchmarked to a reading of 100 on January 2002, when Ipsos started the survey.

The RBC consumer confidence index was based on responses from 1,000 adults surveyed Monday through Wednesday about their attitudes on personal finance and the economy. Results of the survey had a margin of error of plus or minus 3 percentage points.