Consumer Confidence Shows Gains in January

Gallup's Economic Confidence Index improved to an average of minus-21 in Gallup Daily tracking so far in January, up from minus-28 in December. If these optimism levels continue through the end of the month, January 2011 will have the most positive economic confidence score since Gallup began daily measurement in January 2008, Gallup said. Gallup’s Economic Confidence Index shows that consumers are more optimistic about the economy in January than they have been in three years.

Optimism among upper-income Americans is increasing faster than that of their lower- and middle-income counterparts. Gallup's Economic Confidence Index among upper-income Americans (those making $90,000 or more annually) has averaged minus-7 so far in January — a sharp improvement from minus-18 in December, and better than the minus-18 in January 2010. Lower-and middle-income Americans' confidence shows a similar, if more modest, improvement: to minus-24 thus far in January, from minus-30 in December and minus-27 in January 2010.

Gallup's Economic Confidence Index consists of two measures, both of which show improvement: one gauging Americans' perceptions of current economic conditions and the other, their economic outlook. In January to date, 42 percent of Americans rate current economic conditions "poor" -- a slight improvement from 44 percent in December and 45 percent in January 2010. Consumers' assessments of current economic conditions improved slightly more among upper-income than among lower- and middle-income Americans (those making less than $90,000 annually).

Upper-income Americans, as is typical, are less likely to say economic conditions are "getting worse" than are lower- and middle-income Americans. So far in January, 45 percent of upper-income Americans and 56 percent of lower- and middle-income consumers said this, according to Gallup.

The percentage of upper-income Americans (50%) in January who say economic conditions are "getting better" is higher than the percentage who say things are getting worse, for the first time since September 2009, and the second time in the three years of Gallup Daily tracking.

In its commentary Gallup said its Economic Confidence Index shows that consumers are more optimistic about the economy in January than they have been in three years. It may be that the start of a new year, the more cooperative tone in Washington, the continued gains on Wall Street, the Federal Reserve's continuing efforts to stimulate the economy, and the extension of the Bush tax cuts late last year have combined to make all Americans — and particularly upper-income Americans — more optimistic about the U.S. economy.

Confidence is also up despite fears of continued financial problems in Europe, inflation problems in Asia, and state and local financial problems as well as housing issues in the U.S.

Gallup Daily tracking also suggests that the Conference Board will report an increase in consumer confidence. On the other hand, because of its composition of economic measures, the Reuters/University of Michigan Consumer Sentiment Index may not fully correct itself from its early January reading showing a decline in confidence, Gallup said.

Still, creating jobs and balancing the federal budget continue to be among the major challenges facing the nation. Slightly improved economic confidence can help set the stage for a successful effort to aggressively stimulate private-sector job growth and aggressively cut federal spending, but it will take a lot more to actually turn these priorities into realities.

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