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Thu, May 01, 2003 - Page 12 News List

Research shows a leap in consumer confidence index

DEFINITE OPTIMISM One of the first things to recover at the end of fighting in Iraq is the short-term outlook of consumers in the US


US consumer confidence took the biggest leap in 12 years in April as US forces seized Iraq and vanquished lingering war fears, a survey by the Conference Board showed Tuesday.

The private research group's consumer confidence index shot up 19.6 points -- the biggest jump since March 1991 -- to 81.0 points in April, the private research group said.

"The swift outcome in the Middle East has helped quell consumers' short-term concerns," Conference Board consumer research center director Lynn Franco said.

Wall Street's blue-chip index, the Dow Jones industrials average, rose 31.381 points or 0.37 percent to 8,502.99.

"Obviously the consumer confidence report, which was better-than-expected, is positive for the market," said Peter Cardillo, chief strategist at Global Partners Securities.

The index is made up of two components: people's feelings about the future and the current situation. The expectations index leapt 23.4 points to 84.8. The present situation index soared 13.9 points to 75.3.

"While an increase of this magnitude occurred after the Persian Gulf War in 1991, this post-war surge differs in that both components of the index posted gains," Franco said.

"The increase in the present situation index, especially in labor market conditions, may very well signal a turnaround in confidence and a more favorable outlook for consumer spending," she said.

The proportion of consumers expecting more jobs to be available rose to 16.7 percent in April from 10.8 percent in March and those expecting fewer jobs dropped to 20.9 percent.

The ratio of people expecting better business conditions in the next six months surged to 18.7 percent in April from 13.0 percent in March. Those expecting a deterioration dropped to 12.3 percent from 20.0 percent.

Confidence had slumped to a near-decade low in March during the buildup and opening shots of the conflict.

Sentiment also had taken a battering as US businesses, partially paralyzed by the build-up and launch of the war, axed 357,000 jobs in February and then another 108,000 jobs in March.

Even during March, however, people headed to the malls, providing thrust to the US economy. Consumer spending accounts for two-thirds of US economic activity.

Americans boosted spending in March by 0.4 percent, according to seasonally adjusted figures released Monday, raising hopes for a consumer-led rebound.

The increase, a little weaker than expected by Wall Street economists, still kept hopes alive for a pickup in the economy, which grew at a tepid annual rate of 1.6 percent in the first quarter.

Consumer confidence numbers had a shaky record in predicting shifts in consumer spending, BMO Financial Group senior economist Sal Guatieri said.

"It gives scope for optimism but we would like to see these numbers backed up by a sharp improvement in labor market conditions. That would make us much more optimistic on the economic outlook," he said.

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