Americans feel more confident in economy
Published Wednesday, September 26, 2012 6:39AM EDT
WASHINGTON -- Americans are more confident in the economy than they have been in seven months, an encouraging sign for President Barack Obama with six weeks left in the presidential race.
A new survey of consumer confidence rose Tuesday to its highest level since February on expectations that hiring will soon pick up. And a separate report showed home values rising steadily, signalling sustained improvement in housing.
"This is like an opinion poll on the economy without the political parties attached," said John Ryding, chief economist at RDQ Economics, a consulting firm. The confidence survey "says people are feeling better. If so, they are less likely to vote for change."
The Conference Board's index of consumer confidence shot up in September. The jump surprised many economists because the most recent hiring and retail sales figures have been sluggish.
The increased confidence could help explain recent polls that show Obama with a widening lead over Mitt Romney in some battleground states.
The consumer confidence index is closely watched because consumer spending drives nearly 70 per cent of economic activity. The index jumped from 61.3 for August to 70.3 for September. It remains well below 90, the level that is thought to signify a healthy economy.
Among those feeling more optimistic about the economy is Darlene Johnson of Silver Spring, Md., who works for the National Institutes of Health. The value of Johnson's 401(k) account has risen. Home sales in her neighbourhood have ticked up, too, and are commanding higher prices.
"I feel like things are stabilizing," she said. "I don't feel as uneasy as I did a few months ago."
But Johnson, who voted for Obama in 2008, remains undecided on which candidate to back. And she's still a bit nervous about the future.
"It will depend on how my pockets are looking," she says. "Everyday circumstances will drive my decision on how I am going to vote."
Economists point to some key reasons why consumers have grown more confident.
Stocks are up: The Standard & Poor's 500 stock index has surged nearly 15 per cent this year. Gas prices have levelled off after rising for several months. And the broad increase in home prices is likely giving would-be buyers more confidence. When prices rise, buyers don't worry so much that a home might lose value after they bought it.
National home prices rose 1.2 per cent in July compared with a year ago, according to the Standard & Poor's/Case-Shiller index released Tuesday. That was the second straight month in which year-over-year home prices have increased.
Some economists question whether the higher level of confidence is sustainable. They've seen the index spike briefly before since the Great Recession ended more than three years ago. Some say confidence could be affected by negative campaign ads that focus on the economy.
But others note that even a weak economy doesn't feel so bad to many consumers once it begins to make steady improvement.
"The economy is perceived in relative rather than absolute terms," noted St. Louis University political scientist and pollster Ken Warren.
Mark Vitner, a senior economist at Wells Fargo, suggests that former President Bill Clinton might have helped boost confidence with his rousing speech on Obama's behalf at the Democratic National Convention in early September. The Conference Board's consumer confidence survey was conducted Sept. 1-13.
Clinton "rekindled memories of better economic times" and assured voters that the U.S. economy was on the right track, Vitner said.
The consumer confidence survey polled 500 people. The part of the survey that gauges consumers' confidence in the economy now and the part that gauges their outlook for the next six months both rose. Consumers were much more optimistic about the short-term outlook for business conditions, employment and their financial situation.
The rising home prices could also help Obama's prospects. Prices are rising in many large cities in swing states such as Florida, Colorado, Michigan and North Carolina. Prices have risen 3.6 per cent in Tampa, Fla., in the past year, for example. And they're up 5.4 per cent in Denver, 6.2 per cent in Detroit and 2.2 per cent in Charlotte, N.C.
A Washington Post poll out Tuesday showed Obama leading Romney among likely voters in Ohio, 52 to 44 per cent. The president also had a slight edge in Florida, 51 to 47 per cent among those most likely to vote.
Obama is also gaining the upper hand on which candidate is better able to handle the economy. Registered voters in Ohio preferred Obama on the economy by 50 per cent to 43 per cent, and in Florida by 49 per cent to 45 per cent.