Consumers Are Relatively Optimistic, Index Shows

Consumers’ confidence in the economy was steady in December, although Americans grew more cautious in their outlook for the coming months.

The Conference Board said Tuesday that its index of consumer confidence fell a marginal 0.3 point to 126.1, from a revised 126.4 in November. The index had rebounded last month after a four-month slide.

Consumers were moderately more positive in December about the current state of the economy than they were in November, but the modest dip in the index was caused by a decline in expectations for the economy six months from now, according to the Conference Board, a New York-based, business-financed private research group that compiles its index from a survey of consumers nationwide.

If high confidence leads to a burst of spending, that would boost economic growth because consumer spending makes up two-thirds of the U.S. gross domestic product. The survey for this month’s index was taken before the impeachment of President Clinton.

“Consumers are still relatively optimistic about the economy,” said Lynn Franco, associate director of the Conference Board’s consumer research center. “The key to strong confidence levels has been a healthy economy, and the conditions fueling this expansion show no indication of dissipating any time soon.”

A concern voiced by consumers in the Conference Board survey was employment. In December, consumers were somewhat less optimistic about the availability of job opportunities over the next six months.

A separate index gauging consumer expectations for the half-year ahead fell to 97.8, from 99.5 in November, and the index tracking assessment of current conditions rose to 168.5 from a revised 166.7.

Investors and Federal Reserve policymakers watch consumer confidence and spending closely, since spending accounts for such a large part of the economy.

Growth in consumer spending in each of the first three quarters of 1998 surpassed the average quarterly gain for all of 1997. That means U.S. economic growth could reach 3.7% this year, marking the third year in a row it has surpassed 3%. The last time that happened was in 1984-86.

Rising incomes and a low unemployment rate of 4.4% kept consumer spending strong, although Americans did show some caution during the Christmas shopping season by seeking bargains.

Discount chains such as Wal-Mart and Dayton Hudson’s Target outdid traditional department stores by offering consumers the values they were seeking.

By cutting prices, retailers are helping to keep inflation low. The consumer price index is on course for only a 1.6% increase this year--the smallest rise since 1986.

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Consumer Confidence

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

December: 126.1

* Source: Conference Board

Existing-Home Sales

Seasonally adjusted annual rate, om millions of units:

November: 4.9 million

Source: National Assn. of Realtors