Consumers’ Mood Is the Brightest in Nearly 6 Years, Survey Shows
WASHINGTON — Consumer confidence in April soared to the highest level in nearly six years, as Americans expressed a more upbeat attitude about jobs and the labor market, the Conference Board said Tuesday.
Meanwhile, the Labor Department reported that wages and salaries over the last year increased at the fastest pace in four years, although overall worker compensation rose more slowly because benefits did not rise as fast as wages.
The unusual rally in consumer confidence, to the highest level since May 1990, comes at a time when highly publicized layoffs have emerged as a national political issue and sparked a major debate about job security and the social responsibilities of corporate employers.
Moreover, it occurs at a time of mixed signals about the level of consumer confidence and the pace of national economic growth after five years of expansion. Most forecasters view the U.S. economy as growing only modestly this year, with inflation remaining under control.
The new statistics, if not a fluke, suggest that the economy may have a great deal more underlying strength than most analysts perceive. That triggered new fears of inflation and sent bond interest rates higher, with the yield on the benchmark 30-year Treasury bond rising sharply to 6.90% from 6.84% late Monday. The Dow Jones industrial average lost 4.33 points, but other indexes gained.
“This month’s improvement in consumer sentiment is largely attributable to less apprehension about employment conditions,†said Edgar Fiedler, vice president and economic counselor at the Conference Board, a business information center in New York.
Efforts to trace the meandering course of the U.S. expansion have been complicated this year by a series of quirky developments, including severe weather in January, a bounce back from the bad weather in February and, more recently, the strike at General Motors Corp.
Figures released Tuesday underscore the ambiguous signals the economy is sending and the continuing uncertainty about the course of interest rates.
The National Assn. of Purchasing Management predicted that the U.S. economy will slow in the second half of the year and manufacturing employment will fall, based on a survey of its members.
At the same time, pessimists and optimists about inflation could both seize on evidence from a new Labor Department report that found wages and salaries increasing 3.2% in the last year, the steepest gain since March 1992. Yet benefits went up just 2.2% over the period, and actually fell 0.1% in the first three months of 1996 for the first decline on record.
Overall, the gauge of employee compensation ticked upward by just 0.7% during the first three months of 1996, slowing slightly from late 1995.
Nevertheless, it was the new numbers on consumer confidence that prompted debate among analysts Tuesday.
“I’d view it as a reaffirmation of faith on the consumer side†of the economy, said Lisa Guirl, an economist with the Laurence H. Meyer forecasting firm in St. Louis.
But Bruce Steinberg, an economist with the Merrill Lynch investment firm in New York, was reluctant to read too much into the confidence survey, which contradicted a separate survey at the University of Michigan.
“It means that the economy is probably not sliding into recession,†he said. “But otherwise, you cannot make huge conclusions about this number.â€
The Conference Board’s consumer confidence index, which is based on a monthly survey of 5,000 households, shot up to 105.3 last month from a reading of 98.4 in March. The board also found that 21.3% of respondents believe jobs are difficult to get, down from 26.2% in March. Only 15% expect the situation to worsen in six months, down from 18% in March.
By contrast, the rival survey by the University of Michigan detected a minor decline in public confidence last month. There was no immediate explanation for the discrepancy between the Michigan poll and the Conference Board
“It’s hard to tell on one month’s results who’s more reliable,†said Lynn Franco, an economist at the Conference Board. “Historically they’ve gone in the same direction.â€
According to the Conference Board, consumer confidence on the West Coast remains somewhat lower than the U.S. average, although New England and the Middle Atlantic registered the gloomiest results by far.
For example, the Pacific region registered a confidence index of 96.6, compared with the U.S. figure of 105.3.
“Certainly, things in California are better than they are nationally,†said Adrian Sanchez, a private economist in Los Angeles. “We’re seeing acceleration in employment. Housing looks promising if interest rates don’t go up too far. But after four years of recession, there still are a lot of people who are basically pessimistic.â€
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Consumer Confidence
From a monthly survey of 5,000 households; index: 1985=100
April 1996: 105.3
Source: Conference Board
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