Newspaper article THE JOURNAL RECORD

Consumer Confidence Up for Second Straight Month

Newspaper article THE JOURNAL RECORD

Consumer Confidence Up for Second Straight Month

Article excerpt

NEW YORK (AP) -- Consumer faith in the economy surged in August for a second straight month, hitting a new six-year high and raising doubts that the economy is headed for a slowdown.

Economists, who had been expecting a decline in the economic barometer, said news of the unexpected optimism Tuesday could give the Federal Reserve Board more reason to raise interest rates by the end of the year.

"It's not going to be the straw that broke the camel's back. But it's another piece of anecdotal evidence that maybe the economy isn't slowing as much as the markets and the Fed may have hoped for," said Kevin Flanagan, a money market economist with Dean Witter Reynolds Inc.

The Conference Board, a private business research group based in New York, said its Consumer Confidence Index rose 2.4 points to 109.4 this month. Most economists had expected a decline to about 105 in the survey's index.

The increase was especially surprising coming after a sharp 7- point gain in July, indicating consumer sentiment may be "on an upward trend after remaining stagnant for more than a year," said Lynn Franco, associate director of the Board's Consumer Research Center.

The rise in optimism initially jolted the Treasury market, sending bond prices sharply lower on a day that lacked other major economic releases. But prices quickly recovered. Stocks were slightly higher in afternoon trading.

While consumer spending accounts for about two-thirds of the nation's economy, economists stressed that it remains to be seen whether consumers take their optimism to the store.

However, the statistics reinforced recent reports of strength in the job market, retail sales and housing. Economists said the rosy consumer outlook, if confirmed by further signs of vigor, could derail a predicted slowdown in 1996's second half.

That, in turn, could prompt the Federal Reserve to raise interest rates as early as its next policy-making meeting, on Sept.24, as a way to keep the economy from growing at an inflationary pace.

Indeed, central bankers said at their early July meeting, when they left rates unchanged, that they expected robust second quarter economic growth to "slow appreciably over the second half of the year. …

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