Consumer confidence index surges in February

But questions linger as price of gas remains high

Damian Dovarganes/Associated Press

A Los Angeles shopper loaded a 60-inch Samsung LED TV into his truck at a Costco store. A rise in consumer confidence reflected a more upbeat attitude for the nation generally as the economy picked up, the Conference Board said.

NEW YORK - Americans are feeling better about the economy again, but will it last this time?

A widely watched barometer of consumer confidence surged in February to its highest level in a year as Americans took note of improving job prospects among friends and family and falling unemployment, which is now at a three-year low.


The brighter assessment released yesterday by a private research group reflected a more upbeat attitude for the nation generally as the economy picks up. That is a boon for President Obama as he seeks reelection. Polls, including a recent Associated Press-GfK survey, show the Democratic incumbent is beginning to benefit politically from improved views of the economy.

“The economy is getting momentum. Clearly, shoppers are more optimistic about their job prospects,’’ said Amna Asaf, economist at Capital Economics.

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But confidence is still below the level of a healthy economy, and trouble could lie ahead. Rising gas prices could sully shoppers’ mood and derail the economic recovery. There are also fears about a nuclear showdown with Iran and the festering European debt crisis. Those worries could hurt demand for US imports and make American companies pull back in hiring.

The confidence index is closely watched because consumer spending constitutes 70 percent of US economic activity.

The big question mark is the price of gasoline, which Asaf said has climbed 20 cents per gallon since the confidence survey concluded two weeks ago.


The price of gas is a big issue because it has an immediate effect on shoppers’ pocketbooks, particularly low- to middle-income households that are already squeezed by higher costs for basics such as food.

The average US price of a gallon of gasoline was $3.69, according to the Lundberg Survey of fuel prices released Sunday.

The Conference Board’s consumer confidence index now stands at 70.8, significantly higher than the expected 63. A reading of 90 or above indicates a healthy economy. But the index has not reached that level since December 2007, when the recession began.

Still, yesterday’s numbers were closer to levels that indicate a stable economy than to the danger zone that would suggest trouble.

A year ago, the index rose to 72 as the economic outlook was improving. The February 2011 reading was the highest since before the financial crisis in the fall of 2008. After that, the outlook soured again over the spring and summer.

Lynn Franco, director of the Conference Board Consumer Research Center, hoped the upward trend will have staying power this time.

“Consumers are really feeling like the worst is behind them,’’ she said. “We are finally seeing some traction, and hopefully over the next few months that will prove sustainable.’’

The index dropped to a record low of 25.3 in February 2009. Over the past 12 months, it has been going back and forth from the high 60s to the low 40s on continued worries about the economy.

In fact, confidence fell last October to 40.9, the lowest since March 2009, during the thick of the recession.

The Conference Board survey of consumers, conducted from Feb. 1 through Feb. 15, showed shoppers are feeling better about the job market. Those anticipating more jobs in the months ahead rose to 18.7 percent from 16.4 percent, while those anticipating fewer jobs declined to 16.9 percent from 19.1 percent.

Even the housing market, though still weak, is showing signs of recovery. Home values remain depressed, according to the latest snapshot from a widely followed Standard & Poor’s/Case-Shiller home price index. But more people signed deals to buy homes in January than in nearly two years, according to figures from the National Association of Realtors.

Separately, the Commerce Department said US businesses slashed spending on machinery and equipment in January after a tax break expired. That pushed orders for durable goods down 4 percent, the biggest monthly decline in three years.

But economists suggested the drop was largely because most companies made big purchases at the end of last year to qualify for the tax credit, which expired at the end of December.

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