Contradicting the University of Michigan's reading on the pulse of consumer sentiment, the Conference Board's measure of consumer confidence took an unexpected jump in January. From Forbes.com:
A widely watched indicator of consumer confidence unexpectedly rose for the second straight month in January, hinting that the U.S. economy would continue to grow in the first half of 2005, but at a slower pace.
The Conference Board, a New York-based research group, reported Tuesday that its index of consumer confidence rose by 0.7 point to 103.4 in January, up from a revised 102.7 in December.
Economists had been expecting the index to fall to 101.3, in part because of their own concerns about job growth, the ballooning trade deficit and the war in Iraq. "I had been expecting those issues to flow into the January (consumer confidence) number," BMO Nesbitt Burns senior economist David Watt said.
Ah, but wait. The Michigan survey was pulled down by a souring of expectations about future conditions. So too, the Conference Board index.
That said, the group's forward-looking index declined in January, signaling a slowdown in economic growth. The so-called expectations index fell from 100.7 to 98.4.
"For many economists, that's probably the most important part of this report," said Anthony Chan, senior economist at JPMorgan Fleming Asset Management in Columbus, Ohio. Chan said he anticipates the U.S. economy to grow at a rate of 3.5 percent in 2005, down from an estimated 4 percent in 2004.
Chan and other economists said consumer trepidation about the future was likely tied to the nation's high level of household debt and expectations of gradually rising interest rates.
I'm not sure why "the nation's high level of household debt and expectations of gradually rising interest rates" are the most plausible explanations for the respondents' furrowed brows. This bit of information seems more straightforward:
Respondents saying they expected business conditions to improve declined to 21.1 percent from a revised 22.4 percent in December, while those saying they expected conditions to worsen rose to 8.0 percent from 7.7 percent.
The outlook for jobs was slightly worse than the month before. Those saying they expected fewer jobs to become available in the coming months climbed to 15.5 percent from 15.3 percent. Those saying they expected more jobs to become available slipped to 16.3 percent from 16.4 percent.
UPDATE: As discussed in this post, the Conference Board's statistic is probably the better one to focus on.
UPDATE II: Instapundit picks up on the good news, but may have missed the weakening expectations part of the report.