Economy Rebounding Back
Tuesday, March 27th 2001, 12:00 am
By: News On 6
NEW YORK (AP) -Consumer confidence made a forceful comeback in March after declining for five consecutive months, apparently unshaken by the recent turmoil in the stock markets, a private research firm said Tuesday.
The New York-based Conference Board reported that its Consumer Confidence Index shot up to 117, up from a revised 109.2 in February. Analysts had been expecting a reading of only 104.1.
Consumers are also more optimistic about their prospects for employment.
``The rebound in consumer confidence was triggered by an improvement in the economic outlook for the next six months and employment prospects,'' said Lynn Franco, director of the Conference Board's Consumer Research Center.
After the report's release, stocks were higher in late morning trading with the Dow Jones industrial average up 122 points to 9,810 and the Nasdaq composite index up 48 points to 1,966.
The Conference Board index, based on a monthly survey of some 5,000 U.S. households, is considered a key indicator because consumer spending accounts for about two-thirds of the nation's economic activity. The index compares results to its base year, 1985, when it stood at 100.
Although more consumers have invested their funds in the stock market now than at any other time in U.S. history, they seemed unfazed by the massive losses that have stung Wall Street over the past few months, Franco said.
But another report released Tuesday indicated continued weakness in the U.S. economy.
The Commerce Department reported that orders to U.S. factories for big-ticket manufacturing goods fell in February for the second straight month, led by a drop in demand for cars, planes and other transportation equipment.
In an attempt to prevent the sagging economy from slipping into a recession, the Federal Reserve last week slashed interest rates for the third time this year. Analysts expect the Fed will order additional rate reductions to speed economic growth.
However, one analyst said Tuesday's strong consumer confidence numbers may have weakened the chances for an interim rate cut before the next Fed meeting in mid-May.
``Had this report showed another plunge in confidence, then I think it would have been a sure bet to expect another cut sometime in April,'' said Sung Won Sohn, chief economist at Wells Fargo & Co. ``But with this report I think the urgency is not there. We're not trying to catch a falling knife.''
Consumers were not only dramatically more optimistic about the employment outlook in the next six months, but about an improvement in business conditions, the Conference Board said.
The percentage of consumers expecting an increase in business conditions rose from 11.3 percent in February to 15.4 percent in March, while those anticipating conditions to worsen fell from 17.6 percent to 13.6 percent.
As for employment, 12.2 percent of American consumers expect more jobs to become available, up from 10.8 percent last month. Those expecting fewer jobs to become available dropped from 26.5 percent to 20.1 percent.