Wednesday, December 31, 1997

Consumer confidence surges to highest level since 1969

By RACHEL BECK AP Business Writer

NEW YORK (AP) - Americans haven't felt this good about their financial well-being since 1969.

Consumer confidence surged to a 28-year high in December, the latest milestone for an economy soon to begin its eighth year of expansion.

"Growth is up. People are employed. We are competitive with the rest of the world. What's not to be confident about?" said Steve Hoey of Huntington, N.Y., who strolled with his two children in Rockefeller Center.

The Conference Board, a private research group, reported Tuesday that its index of consumer confidence - which tracks sentiment on everything from the job market to home-buying planes - rose to 134.5 this month from 128.1 in November. The figure was well above Wall Street's expectations.

The index is important because consumer spending accounts for two-thirds of the nation's overall economic activity.

Consumer confidence hasn't been this high since June 1969, when it hit 137.9. Richard Nixon was president, the Vietnam War was raging and the United States was undergoing nearly nine years of uninterrupted growth, the longest expansion in U.S. history.

"Consumers see favorable employment conditions and they are making more money," said Dan Seto, an economist at Nikko Securities International Co. "That's providing some good momentum going into 1998."

Still, economists and investors worry that continued robust growth may spur inflation.

Those concerns were evident in the bond market Tuesday, where prices fell and yields rose on the 30-year Treasury bonds, a gauge of long-term borrowing costs.

Stock prices, however, rose. The Dow Jones industrial average climbed 123.56 points, or 1.6 percent, to close at 7,915.97. The Dow is up more than 20 percent for the year.

The consumer confidence index, calculated from a 1985 base of 100, is derived from responses to questions sent to 5,000 households nationwide.

But high levels of consumer confidence don't necessarily translate into strong retail sales, as exemplified by the disappointing results from the 1997 holiday shopping season.

The Board's present situation index, designed to measure consumers' current assessment of the economy, surged from 156.8 to 161.7, its highest level since 1969. The expectations index, which attempts to measure consumers' level of confidence in the future, rose to 116.4 from 108.9.

Consumers said jobs were more plentiful in December and fewer said they had trouble finding employment from a month ago. More consumers also said that business conditions would get better in the future.

"This is the first time in a long time that jobs are plentiful and consumers really feel good about that," said Gary Thayer, a senior economist at A.G. Edwards & Sons Inc. in St. Louis. "It would take some signs of real weakness in the economy for the jobs situation to worsen."

Fewer consumers, however, expected their incomes to rise in the future.

More consumers plan to take a vacation in the next six months, but fewer said they planned to buy a major appliance or a car.

Consumers were most confident in the northern Midwest, while the mid-Atlantic states lagged well behind the rest of the country.