Consumer confidence rises to highest level in six months

In what could be good news for the Obama reelection campaign, The Conference Board reported Tuesday that consumer confidence index as measured in the first half of September has risen to its highest level since February. But the volatile index has fluctuated sharply since then. Last month, it hit its lowest level since November 2011.

The index is widely watched because consumer spending makes up some 70 percent of U.S. economic activity. Lynn Franco, director of Economic Indicators at The Conference Board, stated Tuesday:

The Consumer Confidence Index rebounded in September and is back to levels seen earlier this year (71.6 in February 2012). Consumers were more positive in their assessment of current conditions, in particular the job market, and considerably more optimistic about the short-term outlook for business conditions, employment and their financial situation. Despite continuing economic uncertainty, consumers are slightly more optimistic than they have been in several months.

The measure, begun in 1977, is calculated from a baseline of 100. It has remained well below the 90 reading that indicates a healthy economy since the recession began in December 2007. It was at its lowest-ever point since the board started keeping records when it hit 27 in late 2009. The average confidence level during the three years since the Great Recession officially ended in June 2009 has been 69.4.

Consumers are more optimistic about the next six months than they are about current conditions, the survey showed. Those saying jobs are 'plentiful' rose to 8.3 percent from 7.2 percent. Those saying jobs are 'hard to get' edged down to 39.9 percent from 40.6 percent.

Doug Short and Steve Hansen warn:

Observers of consumer sentiment polls should be aware they are imperfect quantifications of opinion. The question arises whether they are a rear view window or a forward looking indicator ' or possibly a little of each. There is little question, however, that poor consumer sentiment corresponds to poor economic performance. Econintersect believes that consumer sentiment is mostly a coincident or lagging economic indicator.

Whatever the caveats, the latest index, like other measures of the economy, once again shows that digging out of the deep economic hole created by the Great Recession will continue to be a long-term effort.