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Consumers Are Feeling Better At Start Of 2011

The Consumer Confidence Index, as measured monthly by the Conference Board, finds consumers a bit more optimistic as they begin a new year.

After dipping in December, the board’s Index increased this month, and now stands at 60.6 (1985=100), up from 53.3 in December. The Present Situation Index improved to 31.0 from 24.9. The Expectations Index increased to 80.3 from 72.3 last month. Taken together, it shows a significant uptick in confidence.

“Consumers have begun the year in better spirits,” said  Lynn Franco, Director of The Conference Board Consumer Research Center. “As a result, the Index is now near levels not seen since last spring.” 

Sources of confidence

What’s behind the rosier outlook? It’s not the housing market. The latest data show home prices are still falling. And jobs are still hard to come by.

But consumers rated business and labor market conditions more favorably and expressed greater confidence that the economy will continue to expand and generate more jobs in the months ahead. 

“Income expectations are also more positive,” Franco said. “Although pessimists still outnumber optimists, the gap has narrowed.”

Consumers’ assessment of current conditions was also more positive in January. Those saying business conditions are “good” increased to 9.8 percent from 7.7 percent, while those saying business conditions are “bad” was virtually unchanged at 40.4 percent.

Job market improvement?

Consumers’ appraisal of the job market was also more upbeat than last month. Those claiming jobs are “plentiful” rose to 5.2 percent from 4.2 percent, while those claiming jobs are “hard to get” declined to 43.4 percent from 46.0 percent.

Consumers’ short-term outlook was more optimistic than in December. Those anticipating an improvement in business conditions over the next six months increased to 19.0 percent from 16.8 percent, while those anticipating business conditions will worsen decreased to 11.3 percent from 11.8 percent.

Consumers were also more optimistic about the job market. Those anticipating more jobs in the months ahead increased to 16.0 percent from 14.2 percent, while those expecting fewer jobs declined to 17.5 percent from 19.2 percent. The proportion of consumers expecting an increase in their incomes rose to 11.4 percent from 9.9 percent.

What has yet to influence confidence levels are prices. Consumers are paying more than 30 cents a gallon more for gasoline than they did last January. Food costs are also beginning to rise.

If these price trends continue, it’s possible it could dampen consumers’ outlook in the months ahead.