Consumer Confidence Jumps but Skepticism Remains

What doom and gloom? What two Americas? What stock market slump? What's with all those negative economists, anyway?

All of these questions come to mind after the latest consumer confidence survey from the Conference Board released Tuesday showed sentiment in July at its highest level in almost 2 1/2 years.

The confidence index now stands at 106.1, up from 102.8 in June, and has risen in the last four months.

The relevance of those questions, however, becomes a bit more clear when looking at several of the subindices in the research group's closely-watched survey.

Take consumers take on current conditions. The percentage of people saying business conditions are good was basically flat at 25.6%, compared to 25.8% a month ago. More tellingly, perhaps, is that the percentage of people who see conditions as bad rose from 17.4% to 19.1%.

Though more people thought jobs were plentiful in July than in June (19.8% vs. 18.3%), the number of those claiming jobs were hard to find was unchanged, suggesting perhaps that it all depends on the kind of job for which one is looking.

The outlook on the future, though slightly more positive, is also somewhat mixed. The percentage of people who expect business conditions to improve only managed to edge up to 23.2%.

he jobs outlook was also hardy inspiring. Again, though the number of people expecting few jobs declined in June (13.1% vs. 16.8%), the percentage of people expecting more jobs ahead edged lower. Finally, the survey showed 18.1% expected their incomes to rise over the next six months, a decline from 19.7% last month.

"The spring turnaround has been fueled by gains in employment, and unless the job market sours, consumer confidence should continue to post solid numbers," the Conference Board said.

The latest employment figures show job growth slowed dramatically in June, after three months of strong gains. The government next reports payroll data in about two weeks. Other economic data has also suggested the economic recovery could be slowing. Durable goods orders slumped in both April and May, while auto sales plunged in June. More recently, the Conference Board said its own index of leading economic indicators fell in June for the first time in more than a year. The last decline was March 2003, which happens to be when both the economy and stock market began furious comebacks.

The headline confidence number also begs some context. It's the highest reading since January 2002, when the economy was still sputtering and the recession had not technically ended. Job growth around that time was largely nonexistent. The Dow Jones Industrial Average closed out the month at 9920 while the Nasdaq closed at 1934.

For many consumers and companies at that point, the worst was yet to come.And for all those retailers out there wondering where the shoppers have gone, it is good to remember the adage: Pay attention to what consumers do, not to what they say.

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