WASHINGTON – Consumer confidence remained strong in early January as low interest rates and brightening job prospects left Americans feeling better about the future.
A consumer confidence index for January climbed to the highest level since May 2002, far above its low point in February 2003, a month when Americans' anxieties were rising right before the start of the Iraq war.
The January reading of 100.1 in the AP-Ipsos survey (search) compared with a December reading of 100 and a weak confidence reading of 61.5 last February.
Since the February low, Americans' feelings about their economic welfare have been boosted by a third round of tax cuts that took effect during the summer, continued low interest rates that have spurred record home sales and at least the initial signs of an improving labor market.
"When everybody saw those tax refunds showing up in their mail boxes in the summer, they rushed out to spend them ... and people are still pretty darn happy," said David Wyss, chief economist at Standard & Poor's (search) in New York.
The AP-Ipsos consumer confidence index, also called the Index of Consumer Attitudes and Spending by Household (search), is a composite measure of attitudes about the economy generally and consumers' own personal finances.
The attitudes are measured in a monthly telephone poll taken for The Associated Press by Ipsos-Public Affairs. The latest poll was conducted Jan. 5-7.
The survey showed people have grown increasingly confident about job security since late summer. The number of people feeling more confident concerning job security was 47 percent, up from 36 percent who felt that way in August. People also were feeling better about the current state of their local economy.
The job security figure has been trending higher since the summer when the economy finally began growing strongly enough to create new jobs.
That represented a sharp turnaround from the previous three years when more than 2 million payroll jobs disappeared under the impact of the country's first recession in a decade, the Sept. 11, 2001, terrorist attacks, and a wave of corporate accounting scandals and the anxiety created by the buildup to the Iraq war.
Economists said all consumer confidence gauges have been showing improvements since payroll jobs began posting increases in August.
"Employment is really the critical issue for consumer confidence," Wyss said.
The AP-Ipsos confidence index is benchmarked to a 100 reading on January 2002, two months after the last recession ended in November 2001.
Starting in mid-2002, consumer confidence began falling sharply as job layoffs continued to mount and a wave of corporate accounting scandals shook investor confidence. Then in the fall of that year, Americans began to grow worried about the possibility of a war in Iraq.
The uncertainty generated during the buildup to the war essentially brought the U.S. economy to a standstill in the months right before U.S. troops launched the ground invasion on March 20.
However, since President Bush declared the end of major combat operations last May, the economy has rebounded strongly, with economic growth hitting an annual rate of 8.2 percent in the July-September quarter, the strongest increase in nearly two decades.
That burst of activity finally persuaded U.S. businesses to start rehiring laid-off workers, and payroll employment began rising in August.
The confidence index last dropped in October, when it fell to 80.5 from a September reading of 83.2. However, beginning in November it has risen steadily.
The January index reading was based on interviews with 1,000 adults and had a margin of error of plus or minus 3 percentage points.