Consumers greeted the new year in a much more optimistic frame of mind, with their confidence rising to a nearly one-year high in January.
And, according to an Associated Press report, their outlook for the economy’s prospects and their own financial situations over the next six months turned considerably brighter. This improvement comes after a long, angst-ridden period about future economic activity.
“A lot of the fears people had about the economy seem to be dissipating. Fears about inflation and soaring gas prices. Fears about higher interest rates and the housing bust,” said Mark Vitner, an economist at Wachovia Corp.
The RBC Cash Index, based on the results of the international polling firm Ipsos, showed confidence clocking in at 95.3 in January. That was up from 86.9 in December and was the best showing since February of last year.
The new reading also shows that consumers are in better spirits now than they were in January a year ago, when confidence had sunk to 78.2.
The pickup bodes well for the national economy. If consumers are in good moods, they may be more inclined to spend at a pace sufficient to keep the economy moving along. Consumer spending plays a major role in shaping overall economic activity.
Most of the upswing in consumer confidence this month can be traced to people feeling more upbeat about economic conditions and their own financial prospects over the next six months.
This “expectations” index soared to 83.8 in January, from 55 in December. The new reading was the highest reading in more than two years.
That’s particularly important because this measure, which had turned negative after the deadly Gulf Coast hurricanes in the fall of 2005, had been pretty much mired in a weak zone ever since.
“I think it’s very impressive that the expectations component, which was stuck in the mud for quite a while, took a noticeable leap,” said Stuart Hoffman, chief economist at PNC Financial Services Group. “This is a bullet through the heart of the doomsday crowd.”