Consumer confidence rises in January more than forecast

By Sarah ChaneyFeaturesDow Jones Newswires

A measure of U.S. consumer confidence rose in January after a December decline, buoyed by consumers' expectations about the economy.

The Conference Board said Tuesday its measure of U.S. consumer confidence rose to 125.4 in January from 123.1 in December. Economists surveyed by The Wall Street Journal had expected a January reading of 123.0.

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The increase in the Conference Board measure was fed by higher consumer expectations about the economy, as the expectations index rose to 105.5 in January from 100.8 last month. Consumers' view of current conditions decreased slightly to 155.3 in January from 156.5 in December.

The increase in consumer expectations reflects the strength of the stock market and tax reform, said Andrew Hunter, economist at Capital Economics, in a note to clients. Solid consumer confidence suggests consumption growth will begin the year on a strong note, he said.

"Continued strong jobs growth and the boost to incomes from the tax cuts set to be implemented in the coming weeks should ensure that consumption continues to expand at a healthy pace over the first half of this year," Mr. Hunter said.

Economists follow sentiment surveys on the basis that an increase in optimism should translate into increased consumer spending. Recently, consumer spending has helped lift economic output, expanding at a 3.8% annual rate in the fourth quarter, according to Commerce Department figures.

Consumers' strong confidence comes as the unemployment rate is parked at 17-year low and the economy continues to add jobs at a steady pace.

Still, consumer attitudes toward the labor market were mixed in January. Those in the survey saying jobs were "plentiful" rose to 37.6% in January, compared with 36.3% in December, while those claiming jobs are "hard to get" ticked up to 16.4% from 16%.

Business conditions were described as "good" in January by 34.9%, down from 35.8% a month earlier.

The rise in the Conference Board's measure comes after a decline in December and recent moderation in a separate sentiment measure put out by the University of Michigan.

Some areas of concern remain. The percentage of consumers expecting an improvement in income decreased to 20.4% in January from 22.7% a month earlier.

"Expectations improved, though consumers were somewhat ambivalent about their income prospects over the coming months, perhaps the result of some uncertainty regarding the impact of the tax plan," said Lynn Franco, director of economic indicators at the Conference Board. "Overall, however, consumers remain quite confident that the solid pace of growth seen in late 2017 will continue into 2018."

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(END) Dow Jones Newswires

January 30, 2018 11:46 ET (16:46 GMT)