Consumer Confidence Rises to Four-Year High
Mood:  bright
Now Playing: BUSH'S FAULT
Topic: News

U.S. consumer confidence rises to 4-year high
Outlook suggests cooling later this year, Conference Board says
By Rex Nutting

WASHINGTON - U.S. consumer attitudes brightened in March, rising unexpectedly to the most optimistic since May 2002, the Conference Board said Tuesday.

But the outlook for the near-term is still somewhat pessimistic.

The consumer confidence index rose to 107.2 from an upwardly revised 102.7 in February, despite higher gasoline prices.

Economists expected a reading of 101.8, according to a survey conducted by MarketWatch. See Economic Calendar.

The present situation index rose to 133.3 from 130.3, the highest since August 2001. Read the full release.

The expectations index rose to 89.9 from 84.2.

The strength of the present situation index suggests the economy "gained steam in early 2006," said Lynn Franco, head of consumer research for the private group. But the low level of expectations suggests "a cooling in activity" later this year, she said.

The cyclical high in the present situation index "implies a robust growth path for consumer spending," said economists at Action Economics.

The view that the economy could weaken later in the year will weigh on the Federal Reserve's deliberations on Tuesday about monetary policy. Analysts are unanimous in expecting a rate hike after the meeting, and most expect a final rate hike in May to bring the federal funds rate to 5%. See full story.

"Despite generally mediocre attitudes, consumers have performed admirably over the past two years, overcoming a variety of obstacles such as surging energy prices, hurricanes, rising interest rates, and now the housing sector 'bust,'" said Stephen Stanley, chief economist at RBS Greenwich Capital. "In contrast to the prevailing view, we believe that consumer spending will hold up just fine in 2006."

The percentage of consumers who think jobs are plentiful rose to 28.4% from 27.4%, the highest in this expansion. The number who thinks jobs are hard to get also rose slightly, to 20.7% from 20.2%.

The percentage who thinks conditions are "good" rose to 28.3% from 26.4%, the highest since August. The percentage who thinks conditions are "bad" fell to 14.7% from 15.4%.

Despite sagging home sales, the number of consumers who expect to buy a home in the next six months rose to 4%, the highest level since last April.

Market Watch ~ Rex Nutting ** U.S. consumer confidence rises to 4-year high