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Consumer sentiment highest since 2000
Americans confident about stock market, strengthening economy
Updated: 10:59 a.m. ET Jan. 16, 2004NEW YORK - U.S. consumer sentiment enjoyed its biggest one-month jump in more than 11 years in early January, signaling that the economy was likely at a turning point that would lead to better hiring.
The University of Michigan’s preliminary reading of consumer sentiment rose to 103.2, the highest since November 2000, before the recession hit three years ago and the economy suffered through a sluggish rebound.
January’s reading, up more than 10 points from December’s 92.6 level, was the biggest one-month increase since late 1992 and easily surpassed economists’ forecasts for a rise to 94.0.
“It’s a sign, if anything, that perhaps the labor market improved dramatically in the first couple of weeks of January versus December,” said Ian Morris, chief economist at HSBC Securities USA in New York.
The confidence data helped ease worries that the labor market’s slow recovery might undermine consumer spending, which makes up two-thirds of economic activity in the United States.
Consumers’ hearty spending over the past few years, helped by tax cuts and low interest rates, has helped keep the economy from suffering a sharper downturn.
GUIDE Key economic indicators
Click an indicator name to learn more
Period Latest Prev.
• Consumer Confidence Dec.* 91.3 92.5
• Retail sales Nov.* 0.9% 0.0%
• GDP Q3* 8.2% 3.3%
• ISM Index Dec.* 66.2 62.8
• Factory Orders Nov.* -1.4% 2.4%
• Unemployment Rate Dec. 5.7% 5.9%
• Employment situation Dec.* 1,000 43,000
• Consumer inflation Nov. 1.1% 1.3%
• Housing starts Nov.* 2,070,000 1,980,000
• Home sales Nov.* 7,142,000 7,459,000
CONSUMER CONFIDENCE
Recent figures
Dec.* 91.3
Nov. 92.5
Oct. 81.7
Sept. 77.0
Aug. 81.7
July 77.0
June 83.5
May 83.6
April 81.0
March 61.4
Feb. 64.8
Jan. 03 78.8
What is it?
Consumer confidence is considered important because consumer spending accounts for more than two-thirds of U.S. economic activity. The monthly Conference Board survey is one of the two most closely watched indicators of sentiment. Based on a mail-in survey sent to about 5,000 households. Results are converted to an index and expressed in comparison to the 1985 average of 100.
Source: The Conference Board
RETAIL SALES
Recent figures
Nov.* 0.9%
Oct. 0.0%
Sept. -0.3%
Aug. 1.0%
July 1.4%
June 0.9%
May 0.5%
April -0.3%
March 2.3%
Feb. -1.4%
Jan. 03 0.4%
Dec. 1.4%
What is it?
A broad measure of consumer spending trends. Includes sales of motor vehicles, clothing, food at both grocery stores and restaurants, electronics, building materials drugs and other items. Expressed as a percent change from previous month, adjusted for seasonal variations but not price changes.
Source: Census Bureau
GDP
Recent figures
Q3* 8.2%
Q2 3.3%
Q1 2003 1.4%
Q4 1.4%
Q3 4.0%
Q2 1.3%
Q1 2002 5.0%
Q4 2.7%
Q3 -0.3%
Q2 -1.6%
Q1 2001 -0.6%
Q4 1.1%
What is it?
The gross domestic product is the broadest measure of the economy, comprising the value of all goods and services produced in the United States. It is reported quarterly with frequent revisions. Generally expressed as a percentage change from the previous quarter in "real" or inflation-adjusted terms. Economists presume real GDP is capable of growing at an annual rate of about 3.5 percent over the long term. When GDP declines over a sustained period of time the economy is considered to be in recession.
Source: Bureau of Economic Analysis.
ISM INDEX
Recent figures
Dec.* 66.2
Nov. 62.8
Oct. 57.0
Sept. 53.7
Aug. 54.7
July 51.8
June 49.8
May 49.4
April 45.4
March 46.2
Feb. 50.5
Jan. 03 53.9
What is it?
The first major indicator reported each month, considered a reliable assessment of how the manufacturing sector is performing. Based on a survey of executives done by the Institute for Supply Management, formerly known as the National Association of Purchasing Management. Responses are compiled and reported as an index number. A reading above 50 percent indicates the manufacturing sector is expanding, while a reading below 50 indicates it is shrinking.
Source: Institute for Supply Management
FACTORY ORDERS
Recent figures
Nov.* -1.4%
Oct. 2.4%
Sept. 1.4%
Aug. -0.3%
July 2.0%
June 1.9%
May 0.3%
April -2.6%
March 1.5%
Feb. -0.5%
Jan. 03 1.6%
Dec. 0.3%
What is it?
Data on new orders for manufactured goods, adjusted for seasonal variation, offer a good indicator of the manufacturing sector's health, closely watched because it is the most volatile part of the economy. Expressed as percent change from previous month.
Source: Census Bureau.
UNEMPLOYMENT RATE
Recent figures
Dec. 5.7%
Nov. 5.9%
Oct. 6.0%
Sept. 6.1%
Aug. 6.1%
July 6.2%
June 6.4%
May 6.1%
April 6.0%
March 5.8%
Feb. 5.8%
Jan. 03 5.7%
What is it?
One of the best known and most politically powerful economic indicators, the rate is calculated from a monthly survey among a sample of about 60,000 households. The rate is adjusted for seasonal variations, but unlike most economic statistics it is never revised.
Source: Bureau of Labor Statistics.
EMPLOYMENT SITUATION
Recent figures
Dec.* 1,000
Nov. 43,000
Oct. 100,000
Sept. 99,000
Aug. 35,000
July -57,000
June -83,000
May -76,000
April -22,000
March -151,000
Feb. -121,000
Jan. 03 158,000
What is it?
Represents the month-to-month change in jobs on payrolls of the nation's business, government and non-profit establishments. Generally considered a more accurate indicator of labor market health than the unemployment rate. Analysts estimate the economy should add about 150,000 jobs monthly to keep up with the nation's growing work force. Based on a sample of 300,000 establishments employing nearly a third of the nation's workers, the figure is adjusted for seasonal variations and frequently revised.
Source: Bureau of Labor Statistics.
CONSUMER INFLATION
Recent figures
Nov. 1.1%
Oct. 1.3%
Sept. 1.2%
Aug. 1.3%
July 1.5%
June 1.5%
May 1.6%
April 1.5%
March 1.7%
Feb. 1.7%
Jan. 03 1.9%
Dec. 1.9%
What is it?
The most widely known and used measure of inflation, the Consumer Price Index is based on the price of a "basket"of goods including food, beverages, fuel, medical care and clothing. Value refers to year-over-year change in "core" prices, excluding volatile food and energy categories.
Source: Bureau of Labor Statistics.
HOUSING STARTS
(seasonally adjusted annual rate)
Recent figures
Nov.* 2,070,000
Oct. 1,980,000
Sept. 1,931,000
Aug. 1,831,000
July 1,890,000
June 1,844,000
May 1,745,000
April 1,627,000
March 1,742,000
Feb. 1,640,000
Jan. 03 1,828,000
Dec. 1,815,000
What is it?
A good indicator to assess demand for housing and construction industry health. Represents the number of new residential buildings, including single-family and multifamily homes, where construction was started. Expressed as a seasonally adjusted annual rate. Construction was started on 1.7 million new residential structures in 2002, the highest level since 1986.
Source: Census Bureau.
HOME SALES
(seasonally adjusted annual rate)
Recent figures
Nov.* 7,142,000
Oct. 7,459,000
Sept. 7,817,000
Aug. 7,650,000
July 7,275,000
June 7,030,000
May 6,931,000
April 6,854,000
March 6,538,000
Feb. 6,795,000
Jan. 03 7,029,000
Dec. 6,973,000
What is it?
One of the bright spots of the economy in recent years, driven at least in part by historically low mortgage rates. Figure represents the sum of new and existing single-family home sales, expressed as a seasonally adjusted annual rate. In 2002, a record 6.5 million homes were sold.
Sources: National Association of Realtors, Census Bureau
* preliminary figures
Economists said a variety of factors likely boosted confidence: the holidays passing without any attacks, the rise in stock indexes to nearly two-year highs, coming tax refunds and an end to big layoffs.
While companies only added 1,000 workers to payrolls in December, disappointing many expectations for a bigger gain, most economists expect the economy’s healthy pace to lead to more robust hiring in coming months. Weekly claims for jobless benefits have dropped steadily in recent weeks.
Stocks, Treasuries and the dollar all looked past the consumer sentiment figures. The Dow Jones industrial average edged up 0.2 percent, boosted partly by solid earnings from General Electric.
The breakdown of the sentiment index showed expectations for the economy’s six-month outlook jumping by nearly 10 points to 99.5, up from 89.8 the prior month. That big rise in part reflects a climb in stock indexes to nearly two-year highs.
Consumers’ assessment of current economic conditions also improved sharply, to 108.9 from 97.0 the prior month. Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the improvement in the current conditions index “is entirely consistent with the drop in jobless claims.”
The preliminary University of Michigan survey is based on responses from 300 households around the country each month, and the survey’s results are updated at the end of the month with an additional 200 responses.
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