U.S. Economy: Confidence Increases More Than Forecast

Confidence among U.S. consumers rose more than forecast in January, reaching an eight-month high, as the outlook for jobs brightened. Growing optimism, an improving labor market and tax relief may combine to help spur consumer spending, which accounts for about 70 percent of the economy. At the same time, the absence of a sustained housing rebound and unemployment above 9 percent are among reasons the Fed may announce tomorrow it will stick to a plan for more stimulus.

The gain in consumer confidence this month contrasts with the Thomson Reuters/University of Michigan preliminary sentiment index, which fell this month as Americans worried that higher gasoline prices would hurt their finances.

The proportion of Americans who expect their incomes to rise over the next six months increased to 11.4, the highest since May. The share of consumers who said jobs are currently plentiful rose a point to 5.2 percent. Those who said jobs are hard to get decreased.

Confidence rose in all nine U.S. regions, led by a 21.3- point surge in the West South Central area, which includes Texas and Oklahoma. Texas led states with the biggest payroll gains in December as employers added 20,000 workers, a Labor Department report showed today.

Even though consumer confidence may have risen due to a large amount of spending during Christmas, I see this is a good opportunity as the good news spread. The market is still enjoying the leftover consumer confidence from the three months end of 2010. However, the gain in the consumer confidence may act as a boost to both producers and consumers, encouraging them to do more purchasing and selling.