Consumers Shrug Off Global Economic Concerns

In case you haven't noticed lately, the economic headlines have been full of doom. Europe's credit crisis is threatening to spread, the International Monetary Fund has warned the global economy is in danger of collapse, oil prices are rising because of a feared showdown with Iran.

But U.S. consumers are looking on the bright side these days. The Conference Board's monthly Consumer Confidence Index rose to 64.5 in December from November's 55.2. The Present Situation Index increased to 46.7 from 38.3. The Expectations Index rose to 76.4 from 66.4.

In other words, consumers are feeling much better now than they were just a month ago, for whatever reason.

"After two months of considerable gains, the Consumer Confidence Index is now back to levels seen last spring,” said Lynn Franco, Director of The Conference Board Consumer Research Center. “Consumers’ assessment of current business and labor market conditions improved again. Looking ahead, consumers are more optimistic that business conditions, employment prospects, and their financial situations will continue to get better. While consumers are ending the year in a somewhat more upbeat mood, it is too soon to tell if this is a rebound from earlier declines or a sustainable shift in attitudes."

Gas prices

What's behind the burst of optimism? It should be noted that the rising level of confidence coincides with the steady decline in gasoline prices. Even though prices at the pump are still higher than they were a year ago, the drop from high levels of the summer make filling up almost seem like a bargain.

The Conference Board assessment backs up early indications that U.S. retailers enjoyed stronger-than-expected holiday sales, despite a still-recovering economy. In the Conference Board report, the proportion of consumers expecting business conditions to improve over the next six months increased to 16.7 percent from 13.7 percent, while those expecting business conditions will worsen declined to 13.4 percent from 16.1 percent.

Consumers' outlook for the job market was also more favorable. Those anticipating more jobs in the months ahead increased to 13.3 percent from 12.4 percent, while those anticipating fewer jobs declined to 20.2 percent from 23.8 percent. The proportion of consumers expecting an increase in their incomes improved to 17.1 percent from 14.1 percent.