The confidence American consumers have in the economy rose
significantly last month and is now nearly as high as it was before
the economic bubble burst more than three years ago, according to a
report gauging consumers’ outlook on economic conditions.

The Index of Consumer Sentiment, released Friday, reported that
consumers’ confidence in the economy is the highest it has
been since November 2000. The Index was 103.8 in January 2004,
rising from 92.6 in December 2003 and from 82.4 in January
2003.

“Consumers have adopted optimistic expectations for the
year ahead,” University Surveys of Consumers Director Richard
Curtin said. “They’re as optimistic now as in 2000.
Their optimism is comparable to November 2000, before the
recession.”

The Index has not risen above 100 since November 2000, Curtin
said.

The Surveys of Consumers releases the Index of Consumer
Sentiment on the last Friday of every month, after surveying 500
households nationwide.

Consumers’ views on purchasing household durable goods
such as furniture, electronics and appliances reached a three-year
high, leading to the third-highest January index ever recorded,
according to a Surveys of Consumers news release.

“The surge in consumer confidence was due to more
favorable developments in the economy during the past few months
and to the expectation of renewed growth in jobs and wages during
the year ahead,” Curtin said in a written statement.

While the Consumer Sentiment report painted a bright picture for
the future of the economy, federal statements released at the
beginning of last week sent mixed signals.

At its Wednesday meeting, the Federal Open Market Committee
— which reviews economic conditions, sets monetary policy and
weighs risks of economic growth — indicated that interest
rate increases may come sooner than the panel previously suggested
and sooner than most consumers expected.

The timing of interest rate increases can serve as an indicator
of the economy’s condition.

“If the Fed is increasing interest rates, they’re
responding to an improving economy,” Curtin said.

But if states have weak economies, they may respond by cutting
the state budget, which may force universities to raise tuition
rates, Curtin said. The increased higher education payments mean
families have less income, which alters consumers’ outlook
and spending, Curtin explained.

Some students feel economic reports made by the FOMC or numbers
such as the Index of Consumer Sentiments are not as relevant to
students as the job market and hiring rates.

“As students, we are more concerned about the rate at
which companies are hiring,” MBA student Nathan South said.
“Hiring hits people’s pockets more than numerical
indicators.”

South added that while students may pay little attention to
reports like the Index of Consumer Sentiments, the reports probably
make consumers feel slightly optimistic, and they may use economic
numbers to justify spending more.

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