As one might expect, the rising availability of jobs in recent months contributed to the gain. At the same time, the impact of energy prices had, and will have, a material impact — both negative and positive.
Yes, oil prices are above $100 per barrel. Gasoline prices have jumped roughly 35 cents per gallon during the past year, with much of the rise during the past month.
At the same time, however, two other energy developments have helped consumer pocketbooks. Natural gas prices are down 40 percent from a year ago. In addition, warm weather across much of the nation this winter has led to less demand for natural gas, saving consumers money in two ways.
The Index has both a near-term and a six-months-out component, with both rising during February. The Present Situation Index rose to 45 in February from 38.8 the prior month. The Expectations Index rose sharply to 88 in February versus 76.7 in January.
The “major number” for either measure tends to be around 90, a level that typically suggests stronger economic growth. The index has been above 100 at times, while also at a painful low of 25.3 in February 2009.
The “Recession of Confidence”
When traveling and speaking a great deal around North America in many diverse industries, I have noted to audiences that the U.S. economy has officially been in growth mode for 32 months, following the Great Recession which ran from December 2007 to June 2009. When suggesting the 32 months of economic growth, it has been worthwhile to note that we have recorded such growth statistically, if not necessarily emotionally.
I have also talked of the “recession of confidence” that has engulfed the economy, tied to housing weakness, high unemployment, and downright fear in many circles of the size, growth, and direction of the U.S. Government. Unbelievable $1 trillion plus annual deficits of recent years, with similar deficits for as far as the eye can see, hasn’t exactly inspired confidence either.
The recession of confidence appears to be fading, for reasons noted earlier in the GDP discussion. Also as noted earlier, major risks remain firmly in place.
The long-term correlation between consumer confidence levels and consumer spending has not always been as tight as one might expect. However, how consumers feel about their current situation and their expectations for what they will face down the road are important. After all, American consumers account for 70 percent of every dollar spent in the U.S. economy.
Jeff is the only economist in the world to have earned the CSP (Certified Speaking Professional) international designation, the highest earned designation in professional speaking. He is also economic consultant to Zions Bank.