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Report shows unexpected increase in consumer confidence

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#1 ⇑ Haut ⇑ 03-08-2012 10:26:28

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Report shows unexpected increase in consumer confidence

A study, released Tues by a private sector group, showed an unpredicted surge in consumer confidence, which is one of the most significant indicators of an economy's health. Some say, however, that the report may not suggest any real headway in economic growth.

Numbers from survey

The consumer confidence number increased from 62.7 percent in June to 65.9 percent in the most recent poll. The poll was completed by the The Conference Board Consumer Research Center and surveyed 500 individuals between July 1 and July 19.

The increase was unpredicted, coming after four months of decline. Industry analysts had forecasted it would fall again to around 61.5 percent in July.

About 70 percent of the economy is driven by consumer spending, which is why consumer confidence is such an essential economic indicator.

'Historic low levels'

The consumer confidence is still much lower than the 90 percent required for a healthy economy, though it is nice to see that there is some growth at all.

In July, customers were less confident than they were in wage increases in June despite the truth that they were more confident in business conditions and increased hiring.

As long as wages are stagnant, there will not be a lot of growth, according to Conference Board director Lynn Franco:

"Despite this month’s improvement in confidence, the overall index remains at historically low levels... While consumers expressed greater optimism about short-term business and employment prospects, they have grown more pessimistic about their earnings. Given the current economic environment -- in particular the weak labor market -- consumer confidence is not likely to gain any significant momentum in the coming months."

Cautious spending

In the second quarter, the economy only grew 1.5 percent, which was slower than the 2 percent in the first quarter. Personal spending has not changed since June in spite of the 0.5 percent increase in wages. People are being cautious about their spending due to the lack of confidence in the labor industry.

With lower gas prices and increases in the housing market, it might have been anticipated that there would be an increased confidence. Economic experts doubt actual boost in spending though.

Scott Brown is the Raymond James & Associates Inc. chief economist. He said:

“The increase was partly in expectations for business conditions and less pessimism on the future job market, but very little change in the outlook for household income and that is probably more important.”


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