US Consumers Show Big Leap in Confidence

27 March 2002

The closely watched consumer confidence index of New York’s Conference Board bounced back from a slight dip in February to its highest level since August 2001, leaping to 110.2 in March from 95.0 the previous month.

The increase was driven by rises in both the present situation index (96.4 to 111.5) and the expectations component (94.0 to 109.3).

“Consumers’ confidence has been bolstered by the improvement in business and labor market conditions,” explained Lynn Franco, director of the Conference Board’s Consumer Research Center.

“The latest gains are striking. The jump in the Present Situation Index is the largest gain experienced in 25 years, while the Expectations Index has not risen this sharply in nearly a decade. This new boom in confidence should translate into increased consumer spending and stronger economic growth ahead.”

In more good news for the US economy, the Commerce Department announced a 1.5% rise in durable goods orders in February to $179.4 billion (€205.1m; £126bn), the third monthly rise in a row.

However, much of this boost reflects increased government spending, mostly on military equipment. Orders for computers and electronic equipment – seen as a barometer of business spending – slipped from $34.44bn in January to $33.62bn, though this is still well up on the September nadir of $29.31bn.

Also important are business inventories, which fell 0.5% last month. Inventories have been falling for months, prompting hopes that a rush to restock when the economy recovers will boost economic growth. February’s fall was slower than the 0.9% decline in January, suggesting that companies have begun to reorder.

Data sourced from: New York Times; The Conference Board; additional content by WARC staff