WASHINGTON – Americans’ confidence in the economy surged last month to the highest level in nearly five years, as many were encouraged by an improving job market.
The Conference Board said Thursday that its consumer confidence index increased in October to 72.2. That’s up from 70.3 in September and the highest reading since February 2008, two months into the Great Recession.
Consumers were more confident after seeing better job growth, the report noted. Hiring in July and August was stronger than first thought, and employers added a modest 114,000 jobs in September, the government reported last month.
The survey is watched closely because consumer spending drives nearly 70 per cent of economic activity. The reading is still below 90, a level that indicates a healthy economy. It last reached that level in December 2007. But the index is far above the all-time low of 25.3 touched in February 2009.
The gain in consumer confidence could be an encouraging sign for President Barack Obama, who faces re-election Tuesday at a time when the economy is the top issue for most voters.
The reported noted that consumers are more optimistic about both the economy and job market now and where it is headed in the next six months.
Consumers were “modestly more upbeat” about their finances and the outlook for the economy, said Lynn Franco, a Conference Board official. . They “appear to be in better spirits approaching the holiday season,” she said.
Economists have cited some key reasons for why consumers have grown more confident in recent months. Stock prices are higher. Gasoline prices have levelled off after rising for several months. And a broad increase in home prices is likely giving would-be buyers more confidence. When prices rise, buyers don’t worry so much that a home might lose value after they bought it.
Some economists question whether the higher level of confidence is sustainable. But others note that even a weak economy doesn’t feel so bad to many consumers once it begins to make steady improvement.
Consumers’ confidence might have been rattled by this week’s Superstorm Sandy. Disruptions across U.S. industries will slow the economy temporarily, and some stores and restaurants will draw fewer customers. Some of those losses won’t be made up.