The Conference Board index of US consumer confidence, a key indicator of the American public’s spending intentions, showed a marked gain in March following five consecutive months of decline.
In its report monitoring the first three weeks in March, the Board’s consumer confidence index rose to 117.0 from 109.2 in February – the first increase since September. This compares with an all-time high of 144.7 in January 2000 and again in May.
Confidence rose in every section of the nation except in the Middle Atlantic states, a region that includes New York. Respondents here were notably less optimistic about the future than they were in February.
Financial markets, conscious of repeated assertions by Federal Reserve chairman Alan Greenspan that consumer sentiment is an important economic barometer, reacted optimistically and stock values soared. By the day’s close, all three major market indices had gained by over 2.5 percent.
However, the professional entrail-rakers were less easily impressed by the data, despite being much better than anticipated. "No matter how much importance Mr. Greenspan puts on the confidence data, both the equity and the bond market are probably overreacting”, said Bruce Steinberg, chief economist at Merrill Lynch & Company.
He was echoed by another Wall Street Cassandra, Donald J Fine, chief market analyst and managing director at J P Morgan Chase: “If confidence is stabilizing, all that says is that consumer spending won't take off. These numbers are strong historically, but well off the recent peaks,” he grudged.”
The Conference Board' is a not-for-profit, non-advocacy body, representing over 3,000 companies and other organizations in sixty-seven countries. Its monthly survey of US consumers is based on a representative sample of 5,000 households nationwide and is considered an important indicator because consumer spending accounts for two-thirds of the nation's economic activity.
News source: New York Times