Consumer Confidence Rises to Highest Level Since 2008

Consumer confidence
Consumer confidence

Consumer confidence rose to 57.9 in April -- it's highest level since September 2008, The Conference Board announced Tuesday.

Economists surveyed by Bloomberg News economists had expected the index to rise to 53.5 in April. The index was at 52.3 in March and at 46.4 in February. It hit a record low of 25.3 in April 2009. (Base year 1985 = 100.)

Meanwhile, the Present Situation Index increased to 28.6 in April from 25.2 in March, and the Expectations Index improved to 77.4 from 70.4 last month.

Consumers Sense Improving Conditions

Lynn Franco, director of The Conference Board's Consumer Research Center, said improving business and labor market conditions have lifted the mood of consumers.

"Consumer confidence, which had rebounded in March, gained further ground in April. The Index is now at its highest reading in about a year and a half (September 2008, 61.4). Consumers' concerns about current business and labor market conditions eased again," Franco said, in a statement. "And, their outlook regarding business conditions and the labor market was also more positive than last month. Looking ahead, continued job growth will be key in sustaining positive momentum."

Further, consumers' assessment of current conditions improved in April. Those claiming business conditions are "bad" decreased to 40.2% in April from 42.1% in March, while those claiming business conditions are "'good" increased to 9.1% from 8.5%.

Consumers' assessment of the job market also improved in April. Those saying jobs are "hard to get" decreased to 45.0% in April from 46.3% in March, while those claiming jobs are "plentiful" increased to 4.8% from 4.0%.

The board said consumers' short-term expectations also took a positive turn. Consumers expecting business conditions to improve over the next six months increased to 19.8% in April from 18.0% in March, while those expecting conditions to worsen decreased to 12.6% from 13.6%.

A Gathering Trend

Investors should pay attention to the Consumer Confidence Index because, historically, consumer spending has accounted for about 65-70% of U.S. GDP. Increases in consumer confidence are directly correlated with increases in consumer spending. Hence, if confidence rises, and a trend forms, that most likely means good things are ahead for corporate revenue and earnings.

After tepid housing data from Case-Shiller that showed a seasonally-adjusted February price decline in most major U.S. cities, investors will take the better-than-expected consumer confidence data. Americans remain concerned about the U.S.'s high unemployment rate, but they are beginning to see signs of an uptrend in job creation, to go along with the improvement in business conditions, as evidenced by the commercial activity around them, solid earnings reports, and by U.S. stock market gains.

Provided consumer confidence continues to rise in the quarters ahead, that would be another shot in the arm for the U.S. economy, as a rise in confidence bodes well for retail sales. Even so, the American people will need to see tangible signs of sustained job growth, with rising, real incomes, to keep consumer confidence heading higher.