With fiscal cliff uncertainty and worries about the impact of an increase in payroll taxes waning, the Conference Board released a report on Tuesday showing a substantial rebound in U.S. consumer confidence in the month of February.
The Conference Board said its consumer confidence index jumped to 69.6 in February from a revised 58.4 in January. Economists had been expecting the index to climb to 61.0 from the 58.6 that had been reported for the previous month.
The much bigger than expected rebound by the consumer confidence index came after it fell to its lowest level in over a year in January.
Lynn Franco, Director of Economic Indicators at the Conference Board, said, "Consumer Confidence rebounded in February as the shock effect caused by the fiscal cliff uncertainty and payroll tax cuts appears to have abated."
The report showed an improvement in consumers' assessment of current conditions, with the present situation index climbing to 63.3 in February from 56.2 in January.
Consumers saying business conditions are "good" rose to 18.1 percent from 16.1 percent, while those saying business conditions are "bad" fell to 27.8 percent from 28.4 percent.
Meanwhile, consumers had a mixed appraisal of the labor market, as those saying jobs are "plentiful" increased to 10.5 percent from 8.5 percent, while those saying jobs are "hard to get" edged up to 37.0 percent from 36.6 percent.
The Conference Board also said consumers were more optimistic about the short-term outlook, driving the expectations index up to 73.8 in February from 59.9 in January.
Consumers expecting business conditions to improve over the next six months climbed to 18.9 percent from 15.6 percent, while those expecting business conditions to worsen dropped to 16.5 percent from 20.4 percent.
Additionally, consumers that expect more jobs in the months ahead increased to 16.7 percent from 14.4 percent, while those expecting fewer jobs decreased to 21.5 percent from 26.7 percent.
The report also said consumers expecting their incomes to increase rose to 15.7 percent from 13.5 percent, while those anticipating a decrease fell to 19.6 percent from 23.3 percent.
Amna Asaf, an economists at Capital Economics, said, "More generally, the headline index is still well below the long-term average of 92, and with gasoline prices rising and equity prices reversing some of the recent gains, it is possible that confidence will drop back in the coming months."
"Since the cutoff date for this survey, which was mid-February, gasoline prices have risen by an additional 10 cents a gallon, while equity prices are below their five-year high levels," she added.
Friday morning, Thomson Reuters and the University of Michigan are scheduled to release their final report on consumer sentiment in the month of February.
Economists expect the consumer sentiment index to be downwardly revised to 76.0 from the mid-month reading of 76.3.
by RTT Staff Writer
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