With the steady uptick of consumer confidence that has been attributed to the best six months of American job growth, March 2012 recorded the lowest unemployment in three years. Despite rising gas prices, other indicators such as the stock market, consumer spending and the gradual slowing in the decline of home prices are signaling that things are beginning to turn around.
The stabilization of housing prices may be the most significant indicator because home prices have been one of the last areas to respond to the strengthening economy. Many consumers are beginning to make plans to purchase cars, homes and other big ticket items as they regain their confidence in the economy.
The rise in consumer spending is one of the biggest factors in the upswing in the economy since it accounts for close to 70 percent of the American economic engine. When consumers spend, it filters over into the other components of the economy.
Higher gasoline prices have become the most recent dark spot on the rising economy. With the national average price of gas closing in on $4 per gallon, many are wondering whether the higher prices will derail the shift towards improvement in the economy.
What Economists Say
A Bloomberg survey of leading economists found that their median estimates called for a decrease in consumer confidence. The Conference Board Consumer Confidence Index showed an index average of 70 which was down from 70.8 in February. However, this still was much higher than the average of 53.7 that was measured back in June 2009.
Other indicators such as the Conference Board’s Present Situation Index showed a rise from 46.4 in February to 51 in March 2012. This was the highest the indicator has been since September 2008. However, the Board’s Expectations Index fell to 83.0 from 88.4 in February. This drop is thought to be attributed to concerns about rising gas prices.
How Foreign Consumer Confidence Stacks Up
The European economy has struggled over the last few years due to the enormous debts amassed by Greece, Spain, Italy and other countries that make up the European Union. The economy in Europe has continued to struggle although there have been some bright spots in recent months.
In France, things have begun to improve due to upcoming French elections that expect a change in government. The consumer confidence in France rose to a level unseen in over five years. Insee, the French national statistics office saw its confidence measures rise by five points which was the biggest gain since President Sarkozy took office in 2007.
In the UK, the Confederation of British Industry indicators did not show improvement due to the higher gas prices and mounting unemployment. Germany saw a drop in its consumer confidence that peaked back in April 2011.
Dining Out On Upswing
If the increase in restaurant traffic can be used as another gauge of consumer confidence, then things are starting to rebound in the U.S. economy. Several national restaurant chains have reported increased foot traffic and more being spent by consumers at casual dining establishments. The increase in consumer spending is translating into an increase by restaurant operators in opening new outlets and investing in their businesses.
Many economists feel that when consumer confidence is up, it signals that the economy is starting to thaw. Many of the key signals of an improving economy are beginning to point in the right direction. The booming stock market, increased consumer spending on big ticket items and the bottoming out of home prices in the real estate market are all good indications that the economy is improving.
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