Consumer Confidence in Economy Improves
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Consumer Confidence in Economy Improves

WASHINGTON - Consumer confidence in the economy's prospects improved in early April even as gasoline prices and borrowing costs marched higher.

The RBC CASH (Consumer Attitudes and Spending by Household) Index, based on results from the international polling firm Ipsos, showed confidence at 89.4 in early April, up from March's 86.2. The new reading also was better than a year ago, when consumer confidence clocked in at 84.5.

"It's a positive sign," said Stuart Hoffman, chief economist at PNC Financial Services Group.

Overall, consumers are in a generally good frame of mind, economists said.

"I think we can take heart in the fact that even with all the worries - about energy prices, higher interest rates and a slowing housing market - confidence moved higher," said economist Ken Mayland, president of ClearView Economics.

Analysts track consumer confidence for clues about consumers' willingness to spend, an important force shaping the country's economic health.

The confidence index is benchmarked to a reading of 100 on January when Ipsos started the gauge.

One of the things consumers feel really good about is the jobs climate, the Ipsos results suggested.

A measure tracking consumers' sentiments on this front jumped in early April to 124.5, the highest on record. In March consumers' feelings about jobs came in at 118.5, a buoyant reading. A year ago, this gauge stood at 116.2.

Employers boosted payrolls by a sizable 211,000 jobs in March, helping to push the nation's unemployment rate down to 4.7 percent, the Labor Department said in a report Friday that suggested the jobs market is on solid footing.

Analysts believe the economy emerged from an end-of-year funk and grew at an annual rate of 4.5 percent or higher in the just ended January- to-March quarter. The government's estimate of first-quarter economic growth will be released at the end of April.

In the current April-to-June quarter, economists believe the economic growth will probably be in the range of 3 percent, a slower but still healthy pace. That moderation is based in part on the expectation that consumers will turn a bit cautious in the second quarter as energy prices stay high and the housing market slows.

The record-breaking housing market over the last five years and escalating home values have made consumers feel wealthy and thus inclined to spend. They've taken cash out of their homes, which has helped to support brisk spending.

A cooling housing market and slower growth in home values probably would weigh on consumer spending, economists said. But an improving jobs market, on the other hand, would help to blunt some of that negative force, analysts said.

Concerns about the direction of the housing market _ along with rising gasoline prices, which are $2.59 a gallon on average nationwide _ probably played a role in consumers' assessment of current economic conditions, analysts said.

A measure of current conditions dropped to 98 in early April, from 103.9 in March. A year ago, this measure stood at 92.7.

Another gauge tracking consumers' feelings about making a purchase, saving and other investment decisions was 86.7 in early April. That marked a deterioration from March's reading of 98.6. Last year, the investment measure was 87.4.

The Federal Reserve on March 28 boosted a key interest rate to a five- year high to fend off inflation. That action pushed up other borrowing costs, including banks' prime lending rate, which is used for certain credit cards, home equity lines of credit and other loans.

Mortgage rates are rising, too.

Rates on 30-year mortgages averaged 6.43 percent this week, the highest in 2 1/2 years, Freddie Mac, the mortgage giant, reported Thursday.

A measure looking at consumers' expectations over the next six months, including conditions where they live or work and their own financial positions, rose to 56.9 in early April. That marked an improvement from March's 40.7 and was better than 51.3 registered in April last year. Yet it is still at a level indicating some wariness among consumers, analysts said.

The RBC consumer confidence index was based on results of 1,003 adults surveyed Monday through Wednesday about their attitudes on personal finance and the economy. Results of the survey had a margin of error of plus or minus 3 percentage points.

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