Consumers Cheery for Now --but Nervous About ’97

Consumers’ confidence about the economy’s current health is at a seven-year high, but they are increasingly wary that the good times will end by late spring, according to a survey released Tuesday.

The Conference Board’s index of sentiment on current business conditions rose to 131 in November, its highest level since 1989. It was a 6.4-point gain from October and an encouraging sign for merchants hoping for brisk holiday sales.

However, consumers’ outlook for the next six month is less rosy, with that gauge dipping more than 4 points to 91.4% in November.

“What this is telling us is that we have strong conditions now in the economy, but expectations for the future have drifted down,” said Dan Seto, an economist at Nikko Securities International Co. “Consumers are concerned about what’s ahead.”

Consumer confidence is watched closely for indications of consumer spending, which accounts for about two-thirds of the nation’s economy. It is also one of the earliest economic indicators for the month of November.

The Conference Board’s main barometer, its consumer confidence index, was 107.3 this month, the same as the revised October figure. The index jumped 5 points in August and 6.9 points in July, hitting a six-year high before weakening slightly in September and October.

The November figures were in line with economists’ estimates.

The index, calculated from a base of 100, is derived from responses to questions sent to 5,000 households nationwide, polling them on matters ranging from job availability to home-buying plans.

The Conference Board’s report comes as financial markets scour new data for signs of economic weakness and low inflation, two factors that could cause the Federal Reserve Board to hold off on raising interest rates at its Dec. 17 policy meeting.

The latest report by the New York-based private business-finance research organization shows that consumers are quite confident about the present economic picture, with only 13% of those surveyed saying current conditions are bad.

“Consumers are more positive about current business conditions than at any time this decade,” said Lynn Franco, associate director of the Conference Board’s Consumer Research Center.

“The strong level of confidence coupled with low unemployment, modest inflationary pressures and continuing wage growth should translate into healthy holiday sales in coming weeks,” she said in a statement.

But consumers are less confident about the next six months, with only 14% of those surveyed expecting better business conditions ahead.

“This is telling us that the economy is moderating and it will not take off and cause the central bank to raise interest rates,” said Anthony Chan, a senior economist at Banc One Investment Advisors in Columbus, Ohio.

Interest rates fell in the inflation-sensitive bond market on the report. The yield on the 30-year Treasury bond--a key determinant of corporate and consumer borrowing costs--fell from Monday’s 6.42% to an eight-month low of 6.36%, but then rose to finish the day at 6.44%.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Consumer Confidence

From a monthly survey of 5,000 households. Index: 1985=100

November 1996: 107.3

Source: Conference Board