NEW YORK -- Consumers said they anticipate better business conditions and improved job prospects in the new year, adding another piece of evidence to the case suggesting that the U.S. economy could be on the road to recovery.
Ending 2001 on a positive note, the Conference Board here reported that consumer confidence rebounded sharply in December, reversing five months of steady declines, as worries eased about further deterioration in the economy and the labor market. The report suggested that consumer spending could be on the rise -- or at the least consumer apprehension on the decline -- in 2002. For the second straight month, consumers sent the Expectations Index half of the index up soundly, while the Present Situation Index stabilized, ending several months of dramatic declines.
The Conference Board said its monthly index of consumer confidence jumped 8.8 points, rising to 93.7, in December, its first move north since June, from a revised 84.9 in November. Consumers apparently are beginning to sense that the worst of the recession is nearly over and are willing to get back to spending by the second half of 2002.
The Consumer Confidence survey is based on a representative sample of 5,000 households.
"The deterioration in current economic conditions appears to be reaching a plateau, led by a stabilizing employment scenario," said Lynn Franco, director of the Conference Board's Consumer Research Center. "Consumers' short-term optimism is no longer at recession levels, and the upward trend signals that the economy may be close to bottoming and that a rebound by mid-2002 is likely."
Clearly sensing an economic recovery within the next six months, consumers sent the Expectations Index half of the survey, which gauges consumer attitudes about their future prospects, up 14.2 points, to 91.5 in December from 77.3 in the previous month.
Those expecting an improvement in business conditions increased to 22.2% from 17.7%, while those anticipating that conditions would worsen declined to 11.6% from 16.9%.
The employment outlook was also more upbeat. Currently, 16.1% of consumers expect more jobs to become available in the next six months, up from 14.4% in November. Those expecting fewer jobs to become available decreased to 19.3% from 26.3%. Even if jobs are more plentiful, they may not be more lucrative -- 20.7% of consumers said they anticipate a gain in income, down from 22% in November.
Consumers' views of current business conditions were only slightly better than they were last month, sending the Present Situation half of the index, which measures current consumer sentiment, up 0.7 of a point, to 96.9 in December from 96.2 in November. Those rating conditions as "good" increased to 17% from 16.8%. However, those rating current business conditions as "bad" rose to 21.7% from 20.7%. And those reporting jobs were plentiful edged up to 17.6% from 17.5%, while those claiming jobs were "hard to get" dropped to 21.8% from 22.7%.
Still, Diane Swonk, an economist with Bank One Corp., Chicago, said the index does not translate into "smooth sailing ahead" during the first few months of 2002, since consumers, who opened their wallets at year-end to take advantage of deep discounts at retail stores, would likely hold out on spending during the first quarter. But, Swonk said she is optimistic the economy should see a solid recovery in the late winter or early spring and that manufacturers will be under pressure to restock retail inventories that were kept lean throughout the holiday season.
In addition, the economist said that with the war going well in Afghanistan, the Dow Jones Industrial Average above the 10,000 feel-good mark, the weather colder and energy prices markedly lower, she was not surprised that consumers were more merry about the immediate future and spending plans.
"The bottom line is that the trend is in the right direction," Swonk said.
John Lonski, an economist with Moody's Investors Services here, offered a similar assessment and forecast gains of retail sales of 3% in the first half and 5% in the latter part of the year. "Things appear to be getting better from what was a miserable year, but it still looks nothing better than a lackluster pace the first half," he said.
