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NEW YORK (AP) â¿¿ Americans are more confident in the economy than they have been in the past few months, but that doesn't mean they're willing to spend more money.
Consumer confidence rebounded in February, reversing three straight months of declines, as Americans started getting used to the higher Social Security payroll tax, The Conference Board, a private research group said Tuesday.
But the rosier outlook follows major companies from Burger King to Wal-Mart that have cautioned in recent weeks that Americans are pulling back on their spending as they try to stomach their smaller paychecks since the tax rose by 2 percentage points last month.
Robert Zamora, who lives in Boston, says while he feels encouraged that the value of his home and his stock portfolio are rising, he's decided to spend less because of the higher payroll tax, which has reduced his monthly income by $250.
"There is no more discretionary money to go around for anything other than the basics," says Zamora, who works in web development for a financial services firm.
The way Americans feel about the economy has gone through peaks and valleys as they've tried to reconcile improving stock and housing markets with new economic challenges. In addition to the higher payroll tax, gas prices are rising and there are worries that lawmakers won't resolve a budget impasse that threatens to trigger $85 billion in spending cuts starting Friday.
The Conference Board's index is closely watched by economists because it attempts to keep a monthly pulse on how Americans are feeling about everything from their jobs to their incomes. That's important because when Americans feel good, they spend. And since consumer spending accounts for 70 percent of U.S. economic activity, the economy benefits greatly when Americans feel good about it.
The January reading shows that Americans are more confident, but still skittish. Confidence rose to 69.6, up from a revised 58.4 in January and the 60.5 analysts polled by research firm FactSet expected. That's the highest reading since November's 71.5, but well below the 90 that indicates a healthy economy.