Deja View: Consumer Confidence Back Where It Was A Year Ago

Consumer confidence took a sharp jump in February, the Conference Board reported Tuesday—but the widely-followed index of consumer attitudes is still below where it was a year ago.

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The February index of 70.8 is nearly 10 points higher than January's 61.5. But it trails the 72.0 level of last February.

Lynn Franco, director of The Conference Board Consumer Research Center, explains that the latest month-to-month jump is a function of near-term optimism. Franco says that, "despite further increases in gas prices, [consumers] are more optimistic about the short-term outlook for the economy, job prospects, and their financial situation." Yet while the latest reading is a far cry from the low of 25.3 registered in February 2009, as the Associated Press notes, it suggests that the recent year of improvements hasn't changed consumers' feelings much.

Indeed, conditions were worse a year ago, with a flat economy and an unemployment rate of 9 percent compared to today's 8.3 percent jobless rate.

Other confidence indexes are following a similar pattern. Throughout February, the weekly Gallup Economic Confidence Index has hung in the same territory as it was in early 2011, as well as mid-2010, when unemployment was around 9.5 percent. The Reuters/University of Michigan Index of Consumer Sentiment, another respected measure, is also barely above where it was in both January 2011 and January 2010.

Although widely followed and widely quoted in the media, confidence indexes can fluctuate month to month and are more meaningful in the long run. Still, spending patterns matter more. Confidence, after all, doesn't add to the economy; spending does, and it does not always track with how consumers are feeling.

Recent rising gas prices have only begun to bite at consumer pocketbooks, says says Brad Sorensen, director of market and sector analysis at Charles Schwab. Potential increases in gas prices could easily knock a few points off of the index. "That probably will make people feel less confident, but will they spend less? Those are the real questions," he says.

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What's more likely driving renewed optimism among consumers is the drop in the unemployment rate—and the corresponding creation of 200,000-plus jobs in both December and January.

"If you don't follow financial news necessarily, you still probably know the unemployment rate has gone down and the employment picture has gotten better," says Sorensen.

source:http://www.usnews.com/news/articles/2012/02/28/deja-view-consumer-confidence-back-where-it-was-a-year-ago