U.S. consumer confidence jumped this month on a better outlook for hiring and overall growth, supporting other signs that show the economy could accelerate in 2014.
The Conference Board said Tuesday that its index of consumer confidence rose to 78.1 in December, up from 72 in the previous month. November’s figure was revised up from 70.4.
Consumer confidence is nearly back to where it was before the partial government shutdown in October. Steady job gains and a surging stock market have made Americans more optimistic about the economy and hiring both now and in the next six months.
“The upbeat consumer mood bodes well for spending in 2014,” said Michael Dolega, senior economist at TD Economics.
Optimism about the job market is at a five-year high. That is a positive sign for a strong December jobs report, which will be released next week.
Olindy Cinada, 24, of Newport News, Virginia, says he’s seen “a lot more job openings in the past month.”
In fact, he was hired in December as a meter reader for the Newport News Waterworks, the regional water provider owned and operated by the city. As a result, he and his wife are planning to buy a home next year.
A better job market could also drive more consumer spending, which accounts for 70 percent of economic activity.
A last-minute surge of online shopping helped boost overall year-end spending, according to MasterCard Advisors’ SpendingPulse report. Sales from Nov. 1 through Dec. 24 rose 3.5 percent compared with last year, the firm said last week.
While many retailers have reported disappointing year-end sales, consumers appear to be spending more at car dealers, on utilities and other services and online. Americans increased their spending in November by the most in five months, according to government data, led by big gains in auto purchases.
The confidence index has averaged 73.3 this year, according to economists at Barclays Capital, the highest since 2007. That’s above the 45.2 average in 2009, when the economy was in recession for half the year. But it is still below the reading of 90 that is consistent with a healthy economy.
Tim Mooney, a small-business owner in Charlotte, N.C., says sales are up 15 percent at his motorcycle and ATV dealership this year compared with 2012. But he still doesn’t consider the economy anywhere close to full health.
“We’re starting to see a little bit of breathing room, but we’re nowhere near where we need to be,” he said.
The consumer confidence report shows Americans are willing to spend more on large purchases. The percentage of Americans planning to buy a home in the next six months rose to the highest level since July. And the proportion of Americans planning to purchase a major appliance in the next six months rose in December from the previous month.
The increase in plans to buy a home is “very encouraging, leaving us hopeful that gradually rising interest rates will not derail the housing recovery,” Dolega said.
Better hiring is putting more money in more Americans’ wallets. Employers have added an average of 200,000 jobs a month in the past four months, a big improvement from the summer. Those gains have helped push the unemployment rate to 7 percent, a five-year low.
There are some weak spots: Income rose at a slower pace than spending last month. That means Americans saved less to spend more. And existing-home sales have fallen for three straight months, held back by higher prices and mortgage rates.
Still, the economy expanded at a 4.1 percent annual rate in the third quarter, the best showing in nearly two years. The healthy gain largely reflected a jump in restocking, as companies built up their inventories. That’s unlikely to be repeated in the current quarter. But many economists have become more optimistic about the fourth quarter, and expect growth will clock in at a solid 2.5 percent annual rate.