graphic
News > Economy
U.S. confidence rebounds
March 27, 2001: 12:55 p.m. ET

Survey of consumers shows more optimism than expected; durable orders still weak
graphic
graphic graphic
graphic
NEW YORK (CNNfn) - Consumer confidence rose for the first time in six months in March, a report said Tuesday, as Americans are shrugging off declines in the stock market and reports of layoffs and seeing better times ahead soon.

The Conference Board, a New York-based research group, said its index of consumer confidence rose to 117 this month from a revised 109.2 in February. Analysts surveyed by Briefing.com were looking for the March reading to drop to 105, which would have been the lowest level in nearly five years.

graphic"The recent weakness in the stock market has done little to dampen either consumers' assessment of present economic conditions or future expectations," Lynn Franco, Director of the Conference Board's consumer research center, said in a statement.

There has been growing concern recently that weak consumer confidence would hurt spending and prolong the slowdown in the U.S. economy. Consumer spending fuels about two-thirds of the nation's economy.

But a separate report pointed to more weakness in manufacturing. The Commerce Department said orders for durable goods fell in February while January's orders were revised sharply lower.

Stocks rose after the reports as investors decided they liked what they saw. The Dow Jones industrial average rose about 1 percent in late morning trading while the tech-heavy Nasdaq composite index rose about 2 percent.

Consumer confidence is watched especially closely by the Federal Reserve.  Fed Chairman Alan Greenspan, who spoke to business economists in Washington Tuesday, made no mention of the economy's current state of health or interest rates, but focused on better statistical measures needed to gauge how new technologies affect the economy.

graphicThe Fed cut interest rates last week for the third time this year in a bid to keep the United States from slipping into recession. But the strong consumer confidence numbers may have lessened the chances for a rate cut before the next Fed meeting in mid-May, analysts said.

"Had this report showed another plunge in confidence, then I think it would have been a sure bet to expect another cut sometime in April," said Sung Won Sohn, chief economist at Wells Fargo & Co. "But with this report I think the urgency is not there. We're not trying to catch a falling knife," he told the Associated Press.

David Orr, chief economist for First Union, said the unexpected strong number is good news, even if it does slow the next rate cut.

"It will no doubt buoy forecasters who see the recent slowdown in the economy as a temporary affair -- which includes the Fed," said Orr.

Click here for more on bonds and interest rates

The driver of the unexpected increase in confidence is the same component of the index that drove it down the previous five months -- the "expectations" index, which jumped to 83.6 from 70.7 in February. The index measures consumers' views on different aspects of the economy over the next six months.

Consumers expecting an improvement in business conditions increased to 15.4 percent from 11.3 percent in February, which means the optimists now outnumber those who think business conditions will worsen, which fell to 13.6 percent from 17.6 percent in February. Their view of the employment situation also improved, although more of those polled still expect the job situation to worsen than expect it to improve.

Still, Orr said that while the improved outlook is encouraging, it may have less impact on the consumer spending that other components of the index.

"We consider it (expectations index) a gauge of attitude rather than behavior, a distinction the Fed has made as well," he said. "So we would treat its uptick as less than meets the eye."

He said the "present situation index," which was essentially unchanged, is a better measure of how consumers will spend their dollars.

"Taken together, the two components, in our view, do not signal an 'all clear' for consumers," he said.

Durable goods orders show continued weakness

In its report, the Commerce Department said orders for item expected to last at least three years, such as autos, electronics and appliances, fell 0.2 percent last month to a seasonally adjusted $199.20 billion. That was the lowest level since $197.1 billion in June 1999, and weaker than the 0.5 percent increase forecast by economists surveyed by Briefing.com.

graphicThe decline was driven by a drop in orders for planes, cars and other transportation equipment, which fell 2.6 percent. Excluding transportation orders, which vary widely month to month, durable goods orders rose 0.5 percent.

Orr said that part of the report is encouraging. "That data would appear to be welcome relief," he said. But Orr and other economists said that the data for non-defense orders excluding transportation goods was still poor.

"Manufacturing is still in a world of hurt," said Gary Schlossberg, senior economist with Well Capital Management.

Defense orders helped support the overall statistics. New orders for defense goods jumped 28.8 percent. But that left non-defense orders off 6.4 percent.

Orders for industrial machinery and primary metals also fell but orders for electronic and other electrical equipment increased 6 percent due to demand for electronic components.

-- from staff and wire reports graphic





graphic

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.