If consumer attitudes are any indication, the U.S. economy is in excellent shape heading into the new year.
The Conference Board reported yesterday that its index of consumer confidence rose to 141.4 this month, the highest level since October 1968, from a reading of 137 in November.
"Consumers are in very good spirits as the 20th century comes to a close," said Lynn Franco, director of the business group's Consumer Research Center. "Healthy paychecks, continued low inflation and continued job opportunities will keep the economic expansion on its record-breaking course."
Meanwhile, the National Association of Realtors said that sales of existing single-family homes rose 6 percent in November to an annual rate of 5.09 million units, after four straight monthly declines. Rising interest rates on home mortgages have cooled off a red-hot market for homes that saw sales peak at a rate of 5.63 million units in June.
"The basic story for the industry is that activity has slowed from an exceptional pace to a still very strong pace," said Ray Stone of Stone & McCarthy, a financial markets research firm.
Stone noted that with the November sales rebound, the nationwide inventory of single-family homes on the market fell to 1.78 million, which is just a 4.3-month supply at the November selling rate.
"With a declining inventory of homes on the market, but with continued strength in the selling rate, one has to wonder whether existing-home prices are poised to rise more quickly," Stone said.
The roughly 5,000 households surveyed each month by mail for the Conference Board said that both their appraisal of the current economic situation and their expectations for six months from now had improved from November.
Of those responding, only 7.7 percent said they regarded business conditions as "bad." One reason for that assessment was the job picture: 51.5 percent said jobs are "plentiful," while just 11.8 percent said they are "hard to get."
A separate consumer survey conducted by the Survey Research Center at the University of Michigan paints the same sort of picture as that of the Conference Board but is less volatile. It had a reading of 105.4 for this month, down from 107.2 in November.
Along with the release of its figures for its consumer sentiment index, however, the Michigan center said: "The overall loss was relatively minor, with the December level nearly equal to the 1999 average of 105.8--the best year on record. The December loss was due to the combination of higher inflation and lower income growth rates."
The higher inflation is almost entirely the result of the doubling of world prices for crude oil this year, which was particularly noticeable because of its impact on prices at the pump for gasoline, a commodity frequently purchased by consumers.
The Conference Board also reports on consumer buying plans, which were somewhat mixed this month. The share of respondents planning to buy a new car in the next six months fell to 7.6 percent, down only slightly from November but well below the 10-plus-percent levels recorded in the summer. Similarly, the share planning to buy a house in the next six months fell to 3.2 percent, from 3.5 percent in November and 4.9 percent in August.
The share of consumers planning to buy a major appliance--refrigerator, washer, television, vacuum or range--rose to 29.4 percent this month from 28.2 percent in November. Nevertheless, those figures were several percentage points higher this summer.
Some economists, including those on the staff of the Federal Reserve Board, have been forecasting for many months that increases in consumer spending, a mainstay of the long-running U.S. economic expansion, would taper off. One reason they have cited is that so many consumers have bought new vehicles and appliances in recent years that any pent-up demand must have been satisfied by now.
CAPTION: Exuding Confidence (This graphic was not available)