Consumer Confidence at a Three Year High

Yesterday morning Thomson/Reuters and the University of Michigan reported the results of their U.S. consumer confidence survey.  Here are the results:

• The level of 77.5 marks the highest level attained in consumer confidence in three years.
• Economists expectations were exceeded by 3.2 points, or around 5%
• For the first time in six years consumers said that they were hearing more positive economic news than negative

Analysis: This is very good news.  Consumer spending makes up around 70% of the total U.S. gross domestic product (GDP) – as consumers go, so goes the entire economy.  Not only that, but the U.S. consumer also drives the worldwide economy as U.S. citizens buy tremendous amounts of imported goods.

That the results exceeded economist expectations is also a sign that the figure is likely gaining momentum.  I am not a big fan of extrapolating much from a single data point’s worth of information, but that economists were off by a statistically significant amount is a good sign.  Additionally, that consumers are hearing more positive economic news than negative is also a very good sign as consumers are often very skittish.

Clearly the U.S. economy has not just left recession behind, but is also growing with increasing force and confidence.

Importance grade: 9; for all of the reasons described above, this is very good news.  GDP is standing on ground that is firming.  However, until the unemployment situation improves more rapidly I am reluctant to say that the U.S. economy is on firm ground – just “firming,” for now.

Jason