Jobs, Markets Boost Consumer Confidence Index to 31-Year High

With jobs plentiful and stocks soaring, consumer confidence rose in December to the highest level in three decades, surprising analysts.

The Conference Board said Tuesday that its index of consumer confidence rose to 141.4 this month, the second-highest reading in the 32 years that the figures have been kept by the business-financed study group.

The last time the index was higher was October 1968, when a combination of President Johnson’s Great Society programs and rising defense spending to fuel the Vietnam War created a guns-and-butter economic boom. The index then hit 142.3.

This time around, consumers are the driving force behind the good economic tidings. The latest evidence came in separate reports of stronger-than-expected holiday sales in the nation’s malls and on the Internet.

“Consumers are in very good spirits as the 20th century comes to a close,” said Lynn Franco, director of the board’s consumer research center. “Healthy paychecks, continued low inflation and continued job opportunities will keep the economic expansion on its record-breaking course.”

December’s consumer confidence reading was considerably stronger than analysts had expected. They had predicted that the index--which is based on a survey of 5,000 U.S. households--would dip to 135 in December from a revised 137 in November.

The report also said consumers continued to be optimistic about jobs. Of those surveyed, 16.4% said they expected more jobs to be created, while 10.4% anticipate fewer. The rest expect no change.

The current economic expansion, which began in March 1991, is expected to continue through February and become the longest in U.S. history. Consumer spending accounts for about two-thirds of the nation’s overall economic activity.

The longest economic expansion to date is 106 months--from February 1961 until December 1969. It was fueled in part by heavy defense spending for the Vietnam conflict. Unemployment and inflation were low, and the stock market was strong. Business was so brisk on the New York Stock Exchange in those pre-computerized trading days that the NYSE was closing on Wednesdays to keep up with the paperwork.

With all the economy’s strength, there are signs that activity has peaked.

“As strong as consumer spending has been, it is actually decelerating,” said Mark Vitner, an economist at First Union Corp. in Charlotte, N.C. “It was stronger in the first half of 1999 than in the second half, and we expect it to weaken further next year.

“In some ways, consumers are kind of shopped out.”

Federal Reserve inflation fighters could put a damper on the buying binge, as they are widely expected to raise interest rates early next year to cool the economy. At their meeting Dec. 21, Fed policymakers decided to postpone any rate hikes until after any year 2000 computer problems had been dealt with.

“These 1/8consumer and retail 3/8 numbers weigh on the side of the ledger for tightening” credit, said Paul Christopher, an economist at A.G. Edwards & Sons in St. Louis.

This holiday season, however, solid consumer confidence translated to solid sales.

The International Council of Shopping Centers, a New York-based trade group, said sales at malls rose a surprisingly strong 7.7% from Thanksgiving through Christmas, the best performance since 1992.

And shoppers also made heavy use of the Internet this holiday season. Analysts estimate online sales grew about four times from a year ago, well above estimates that sales would double from 1998.

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Consumer Confidence

From a monthly survey of 5,000 U.S. households.

Index: 1985-100. Quarterly data and latest:

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Dec.: 141.4

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Source: Conference Board