Consumer confidence hit a three-year high this month, as Americans warmed to the idea that the economy is turning a corner.
The index hit a better-than-expected 70.4 in February, up from 64.8 in January, according to The Conference Board, global business membership and research association based in New York. It was the highest level of confidence it had reported since February 2008, shortly after the recession began.
Although changes in the way the index is calculated has pushed up the confidence index, “the improvement in February is perhaps even better than it looked,” writes Paul Dales, senior US economist at Capital Economics in Toronto. The index’s consumer expectations component rose above its long-run average for the first time since before the recession, he points out. “This is ultimately what matters, as expectations determine spending.”
The Conference Board isn’t the only one seeing improving confidence. Corporate executives are also seeing better times ahead, in part because of improving consumer confidence, according to a survey to be released Wednesday by The Corporate Executive Board, a best-practices exchange for executives based in Arlington, Va. [Editor's note: This sentence was changed to accurately reflect the location of the exchange's headquarters.]
One of the biggest changes in the new survey was that 56 percent of executives expect consumer confidence to improve over the next 12 months, up from 39 percent in the previous quarter.
“We're just really starting to turn the corner when we're looking at normalization of business patterns,” says Michael Griffin, executive director of global research for the Corporate Executive Board. The survey also found that 58 percent of executives expected to increase their headcount and 70 percent expected to boost their capital spending over the next 12 months.
“There are still a lot of headwinds,” he cautions. A whopping 84 percent of executives expected their core input costs to rise over the next year.