Americans’ Confidence Stays Near 7-Year High

Americans’ confidence in the U.S. economy held close to a seven-year high in February even as signs emerged that consumers are concerned about a possible slowdown later in the year, the Conference Board said Tuesday.

The overall index of consumer confidence dipped to 118.4 this month after January’s number was revised almost 2 points higher to 118.7, a seven-year high. The New York-based research organization said its separate index tracking consumers’ assessment of present conditions rose to its highest level since 1970, climbing to 143.4 from 141.2 a month ago.

Longer-term, however, Americans are wary. The board’s expectations index, which measures what consumers think will happen to the economy six months from now, fell to 101.7 from 103.8.

That’s still a higher reading than at any point in 1996, and those high confidence levels could be a danger sign. On Tuesday, Federal Reserve Board Vice Chairman Alice Rivlin said the U.S. economy is in danger of overheating; that could be a warning that the central bank may boost borrowing costs to slow growth.

“The biggest near-term threat to the economy would be too much of a good thing,” Rivlin told members of the Credit Union National Assn.

But she also said the tight job market--the nation’s unemployment rate of 5.4% is near its lowest level in six years--is not as worrisome as some economists fear.

“Tight labor markets are basically a very good thing, not just for those looking for jobs now, but for the future health and productivity of our economy,” she said.

In a separate report Tuesday, the Labor Department reported that prices U.S. businesses paid for imported goods slipped 0.3% in January even as petroleum costs jumped. Petroleum import prices increased 1.3%.

Analysts say last month’s surge should be short-lived, however. Oil futures have tumbled more than 15% from the six-year highs reached in early January, when traders worried that inventories were too low to meet winter demand and new supplies weren’t being produced as expected.

Tuesday’s consumer confidence report suggests the public is likely to continue to spend and propel the economy forward in the weeks ahead. Consumer spending accounts for two-thirds of economic activity.

The issue for Fed policymakers is whether stronger growth will lead to higher inflation, Rivlin said. Fed officials are “watching carefully” for signs of accelerating prices and other imbalances in the economy, she said.

Analysts say the Fed’s policymaking Open Market Committee isn’t likely to raise the overnight bank lending rate when it next meets on March 25.

Consumer Confidence

Consumer confidence dipped nationally and in he Pacific region this month but remains sharply above year-ago levels. (Feb ‘97) Index: 1985 = 100:

Pacific region: 121.8

National: 118.4

Note: Pacific region is California, Oregon, Washington, Alaska and Hawaii.

Source: Conference Board