Posted on 09/15/2006 8:54:13 AM PDT by Obadiah
WASHINGTON - Consumer confidence zoomed to a seven-month high as lower gasoline prices made people feel a lot better about the current economic climate and their own financial standing.
The RBC Cash Index, based on the results of the international polling firm Ipsos, showed confidence rebounding to 93.7 in early September.
That marked an improvement from August, when consumer confidence sank to a three-month low of 74.8. At that time, the toll of soaring energy prices was blamed for weighing on consumers' psyches. The recent drop in energy prices, however, provided people with some relief and propelled confidence to its best reading since February.
"The drop in pump prices is very visible to consumers and seems to have a huge impact," said Lynn Reaser, chief economist at Bank of America's Investment Strategies Group. "Consumers seem to view gasoline prices as a barometer to their overall well being."
After surging past $3 a gallon in many areas, gasoline prices are now hovering around $2.62 a gallon nationwide, the Energy Department says.
Economists believe that price relief figured prominently in the upswing in consumers' feelings about current economic conditions. This measure shot up to 118.8 in early September. That was up sharply from 92.1 in August and was the highest reading on record. Ipsos started the confidence index in 2002.
The drop in other energy prices also is good news for consumers and businesses alike, analysts said.
Oil prices, which surged to a record closing high of $77.03 a barrel in mid-July, have since eased and are now above $63 a barrel. Natural gas prices, meanwhile, fell to a two-year low on Thursday, raising hopes that homeowners who depend on gas to heat their homes will see lower bills this winter.
The rebound in consumer confidence comes as the election season is in high gear. Economic conditions may shape voters' choices at the polls. President's Bush approval rating on the economy is at 39 percent among all adults surveyed in an AP-Ipsos poll. That remains near his lowest ratings.
Consumers' sentiments about making a purchase, saving and other investment decisions also improved considerably in September.
This investment measure jumped to 110 in September, up from 83.2 in August. It was the second-best showing on record, trailing only a reading of 111.7 in late January 2002, when the economy was in recovery mode after the 2001 recession.
Analysts mostly attributed the pickup in September's investment measure to receding mortgage rates. Rates on 30-year mortgages fell this week to 6.43 percent, the lowest since early April, according to Freddie Mac.
Analysts also believe the Federal Reserve's decision in early August to halt a rate-raising campaign that began more than two years ago probably played a role in the improvement in the investment index. Many economists predict the central bank will leave rates alone again when they meet next week.
That will give borrowers breathing room, said Richard Yamarone, economist at Argus Research.
Analysts track consumer confidence for clues about consumers' willingness to spend, an important factor shaping economic activity. Economists were hopeful that the retreat in energy prices will leave people with more money in their wallets that they will spend on other things.
"The consumer is not going to get hit as hard as some people had feared," said T.J. Marta, a fixed-income strategist with RBC.
Still, economic growth is expected to stay subdued through the rest of the year at around a 2.6 percent pace, according to some economists' projections.
Consumers' feelings about future economic conditions rose to 39.4 in September from 21.8 in August.
The confidence index is benchmarked to a reading of 100 on January 2002, when Ipsos started the gauge.
A gauge measuring consumers' sentiments about jobs clocked in at 119.4 in September, down slightly from 120.5 in August. Hiring picked up in August, pulling the unemployment rate down to 4.7 percent.
The RBC consumer confidence index was based on response from 1,001 adjusts surveyed Monday through Wednesday about their attitudes on personal finance and the economy. Results of the survey had a margin of error of plus or minus 3 percentage points.
Notice! All Freepers. The Falling Democrat Activist risk level is set to condition orange today!
The Usual FR Suspects are Deeply Saddened.
I just hope the morons at the Fed don't raise credit again before the November election!
OH YEAH! What you said!
LOL! Doesn't look good for them with elections coming up, does it.
Too bad, so sad.
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