NEW YORK — Buoyed by an improved job market, consumer confidence reached its highest level in nearly four years this month.
The index soared to 109.6 from 107.5 last month.
But rising gas prices may weaken consumer confidence, said the research director of the Conference Board, which releases the Consumer Confidence Index. The board said the index was bolstered by a strong gain in the Present Situation component, which climbed to 136.2 this month from 133.3 last month.
“Improving present-day conditions continue to boost consumers’ spirits,” said Lynn Franco, director of the Conference Board Consumer Research Center, in a statement. “Recent improvements in the labor market have been a major driver behind the rise in confidence in early 2006.”
Franco went on to say that, looking ahead, “consumers are not as pessimistic as they were last month. However, expectations for the economy and labor market have been trending downward since peaking in 2003. And, while prices at the pump have yet to impact confidence, further increases could dampen consumers’ mood.”
Indeed, 72 percent of the 58,000 consumers ages 16 and older polled this month by NPD Group said rising gasoline prices will negatively affect their discretionary spending. With gas prices around the country averaging $2.77 a gallon and a $4 gallon in sight, consumers are starting to rethink nonessential purchases, said Marshal Cohen, chief industry analyst at NPD Group. “Spending an extra $10 a week for gas doesn’t sound like much, but it adds up,” Cohen noted.
The higher gas prices, as well as maxed-out credit cards and higher utility bills, will probably start dampening people’s discretionary spending next month, Cohen projected. Purchases of more than $100, including fashion apparel, are likely to take the biggest hit, the NPD analyst said of the gas-price phenomenon, which, he added, has become an emotional issue for many.
The 72 percent share of consumers who said they’ll curtail nonessential spending because of higher prices at the pump is up from 57 percent who told NPD they’d do so back in March 2005.
Nonetheless, the Conference Board said consumers’ “overall assessment of current conditions remains favorable.” Consumers polled for the index who described conditions as “good” climbed to 29.7 percent from 27.9 percent in the prior month, while consumers who characterized conditions as “bad” rose to 15.1 percent from 14.7 percent.
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Regarding jobs, those polled who said jobs were “plentiful” climbed to 29.1 percent this month from 28.3 percent in last month. Consumers who said jobs were “hard to get” dropped to 19.6 percent this month from 20.4 percent last month.
“Those expecting more jobs to become available in the coming months increased to 15.7 percent from 13.7 percent in March,” the board said in its report. “Those expecting fewer jobs, however, remained unchanged at 16.4 percent.”