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US Consumer Confidence Surges


U.S. consumer confidence increased sharply this month, after four months of decline.

The Consumer Confidence Index now stands at 81, up almost 20 points from last month's 61.4, the index's lowest point since October of 1993.

Lynn Franco, the Director of the Consumer Research Center at the Conference Board, the private business analysis group that conducts the confidence survey, said the surge constitutes a "post-war boom" much like the one that followed the conclusion of the Gulf War in 1991. But, she added, this increase may have lasting power.

"Expectations are up, and that's usually an accurate forecast of GDP (gross domestic product) growth down the line. And [the] present situation is up, which tends to lead to increases in consumer spending," she explained. "If we continue along this path, it could signal better and stronger times are ahead."

The Consumer Confidence Index measures both consumers' future expectations and their assessment of current conditions. Ms. Franco says that the present surge registers an increase in both areas, whereas after the Gulf War, only expectations were higher.

Ms. Franco says long-term recovery in consumer confidence and, by extension, the U.S. economy, will require a strengthening of the labor market. The current reading, she says, may contain hints of such a recovery.

"We're still seeing weak labor market conditions and they're not expected to turn around until year end," she said. "Our 'jobs are hard to get' component, which usually corresponds to the unemployment rate, declined in April. So we could be seeing signs of a bottoming out. Consumers are expecting more jobs to become available down the road."

Ms. Franco says next month's Index is likely to hover at around the same mark, as the post war euphoria subsides.

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