Consumer Confidence Hits 19-Year High

Consumers’ confidence has climbed to its highest point since 1969 as low inflation and a strong job market have left people “somewhat euphoric,” an economic research group said Tuesday.

“All of the ingredients that give the consumer a sense of well being are working together at this moment,” said Fabian Linden, executive director of the Consumer Research Center of the Conference Board.

The Conference Board, a business-financed research organization, commissions a monthly survey of 5,000 households throughout the United States. The board’s consumer confidence index jumped 3.5 points to 119.2 in the May survey. That was up 16.2 points over its level of a year earlier and the highest since December, 1969, when it stood at 126.0.

The strength of consumer confidence is surprising in light of the Labor Department’s report Monday that most workers have failed to stay ahead of inflation for five quarters in a row.

Harder to Save

Not since the spiraling inflation of 1979-81 have workers gone that long without an improvement in their standard of living through wage gains, the Bureau of Labor Statistics said.

The Conference Board’s survey indicated more optimism than another report released Tuesday by the International Assn. for Financial Planning, but the latter was based on a survey conducted three months earlier.

That survey of 1,008 people found that 39% said it is harder this year than a few years ago to pay their bills and still have money left over, in contrast to 29% who said it was easier.

Also, 39% said the next generation will have worse financial opportunities than those available today, while 29% said the opportunities would be better.

Good News for Economy

Linden said consumers’ confidence probably was helped by their feelings of job security. The Labor Department reported Friday that unemployment had edged up to 5.6% in May from its 14-year low of 5.4% in April.

The average workweek has lengthened, Linden noted, meaning people are working more overtime and bringing home bigger paychecks.

Also, Linden said, consumer price inflation is low enough that it is not noticed by shoppers from week to week.

The strength of consumers’ confidence is good news for the economy, said Linden, who contends that the consumer confidence index is more accurate than the government’s Index of Leading Economic Indicators in predicting economic growth.

Nearly 32% of those surveyed considered business conditions to be good, up from 28% in April. Almost 31% said jobs were plentiful, up from less than 21% the month before.

Only 5.5% said they expected business conditions to deteriorate in the next six months, down about a percentage point from April. That figure had risen to more than 12% in November, after the stock market collapse.

Buying plans were also firm. Of those surveyed, 9.4% said they planned to buy a car in the next six months, up from 9.1% in April; 35% said they planned to buy a major appliance, the same as in April, and 3% said they planned to buy a home, down from 3.5% in April.

The Conference Board began monitoring consumer confidence in 1967. The index began in January, 1969, and was higher than it is now throughout its first year. It fell sharply in January, 1970, as the economy headed into a recession.