January 31, 2012 (Chris Moore)

Positive news about employment gains pushed consumer confidence up for the fifth consecutive month in January according to the latest Surveys of Consumers by Reuters/University of Michigan.

The number of respondents in the survey who reported hearing news of the improved employment numbers tied a record dating back to 1983, but their optimism was waning, as about half of the respondents still expected the unemployment rate to remain unchanged over the next year.

Of the remaining half, the respondents were pretty much equally divided between those who thought that the unemployment rate would go down and those who thought the rate would go up.

Respondents continued to show a lack of confidence in government policies, which remained near all-time lows, but twice as many of the respondents anticipated an improved near-term outlook than those who did just five months ago.

Consumer’s views of their own personal finances also continued to be dismal.

For the 40th consecutive month, more consumers reported that their incomes had declined than had increased and only one-in-four of the households said that they expected their personal finances to improve over the next year.

All three indices that make up the Index of Leading Economic Indicators posted gains again in January, with two of the three above last year’s levels.

The Consumer Sentiment Index climbed 7.3 percent to 75.0 in January, up from 69.9 in December and up 1.1 percent from 74.2 in January of last year.

The Consumer Expectations Index increased to a level of 69.1 in January, up 8.6 percent from a level of 63.6 in December but down 0.3 percent from a level of 69.3 in January 2011.

The Current Conditions Index climbed 5.8 percent to 84.2 in January, up from 79.6 in December and up 2.9 percent from 81.8 in January of last year.

Richard Curtin, Surveys of Consumers chief economist said, “Although the current level of confidence has nearly regained its highest level since the recession, this is the third consecutive year that confidence has mounted a comparable rally. All prior rallies failed when consumers concluded that the improvement they had anticipated had failed to materialize. The recent gains in confidence are now critically dependent on continued job gains. As long as modest employment gains are forthcoming, the data suggest real consumer spending will post a 2.1% gain in 2012. There is no symmetry between the rate of job gains and spending: lower job gains will have a disproportionate negative impact on spending.”

Tags: Surveys of Consumers, Reuters/University of Michigan, consumers, economic slowdown, finances, recession, financial expectations

Reuters/University of Michigan