Surging stock prices? Check.
By DIANE STAFFORD
The Kansas City Star
More hiring? Check.
More house, car and retail sales? Check, check, check.
Americans appear to be concentrating on the good stuff and discounting government spending cuts, higher gasoline prices and the impending demands of the Affordable Care Act.
Instead, theyre expressing more economic confidence about the present and the near future than at any time in the last five years.
There isnt a full-scale tilt to optimism yet, but the Conference Board said Tuesday that its Consumer Confidence Index hit its highest since February 2008.
The closely watched consumer survey assesses how people feel about business and labor market conditions and the May results indicate that optimism is gaining ground against long-running pessimism.
Weve definitely felt things starting to change, said Justin Pattison, general manager of Aminis in Overland Park, which sells home furnishings. People are spending money on fun things like outdoor furniture and game rooms, not the have-to things that were broken. For the last couple of years, the consumer seemed scared, but the mindset has changed.
Economists, like merchandisers, see consumer confidence surveys as important indicators. Consumer spending accounts for about 70 percent of the U.S. economy, so when shoppers arent afraid to open their wallets for discretionary spending, the gross national product grows.
A new Gallup poll, similar to the Conference Board index, also found increased optimism. Gallup said Tuesday that U.S. consumers are the most upbeat since Gallup began tracking U.S. economic confidence daily in 2008.
That confidence is translating into sales.
Mark Smith, president of Dick Smith Ford in Raytown, said the confidence uptick seemed to begin early this year. Sales of new cars and light trucks at his dealership climbed 40 percent through April compared with 2012, and he expects a similar increase for May.
That people are willing to spend money on cars says a lot about confidence, Smith said.
Nationally in the first four months of 2013, auto sales are up 7 percent compared with the first four months of 2012.
Perhaps the biggest confidence boost in recent weeks came from the residential real estate market.
Whats changed is the housing market, said Frank Lenk, chief economist at the Mid-America Regional Council. Its easier to sell a house; backlogs are reduced. People see houses moving in their neighborhoods and that makes people think theres an end to long, drawn-out issues that have taken time to resolve.
The biggest improvements are being recorded in cities that were most hurt by the housing bubbles burst. The Kansas City area generally skirted that collapse, but the turnaround is good news in all markets.
National housing sales in April rose to a five-year high for new homes and a three-and-a-half-year high for resales, according to the Standard & Poors/Case-Shiller national report.
Were still seeing strong showings and a sense of confidence that people are more comfortable about their jobs, said Brenda Oliver, president of the Kansas City Regional Association of Realtors.
Kansas City isnt in the Case-Shiller index, but the April report by the Realtors association indicated sales of existing homes in the area were up 6 percent from a year ago and new home sales increased 23 percent. Pending contracts for existing homes were up 27 percent compared with last year and contracts for new homes were up 19 percent.
And through April, compared with the first four months of last year, the number of new and existing houses sold was up 6.4 percent and the average price was up 6.7 percent.
The average sales price of a new home in the area last month was $334,060, up 6 percent, and $155,468 for an existing home, up 4 percent.
People believe if they purchase real estate they wont lose money, Oliver said. Prices have stabilized and will continue to appreciate.
The housing market also may be helping consumers overcome frets about high gasoline prices.
People are used to gas price volatility, Lenk said. Theyre just not factoring it in as much, as long as its stayed under $4 a gallon.
Conference Board economist Lynn Franco, who comments on the confidence survey results, agreed that drags on consumer sentiment had weakened. She cited apparently reduced concern about higher payroll taxes, which went into effect in January, and about federal spending cuts that began in March.
And, analysts advised, dont discount stock market gains as an influence on consumer sentiment. Its not just business and wealthy investors who benefit when the Dow Jones industrial average and other stock indexes soar. Many Americans now have stock in their retirement funds and other savings and profit-sharing plans.
The Dow average has climbed 17.6 percent this year and is hitting all-time highs. It finished Tuesdays trading up 106.29 at 15,409.39.
Economists are suggesting that as stock values rise and people see their 401(k) balances growing, they simply feel wealthier, and that wealth effect translates into spending.
Investors have shown confidence in buying stock mutual funds, said Hank Herrmann, chief executive officer of Waddell & Reed Financial Inc. in Overland Park. Still, Herrmann said investors taste for stocks remained below normal.
Its an improvement, but its not the great rotation where people sell bonds to buy equities, Herrmann said.
Some long-running downsides do remain in the economy. Private-sector employers have recorded 38 straight months of net job creation, and total growth has averaged 196,000 jobs a month this year, but long-term unemployment remains a problem for about four in 10 job searchers, even as the national jobless rate dipped to 7.5 percent in April, its lowest since December 2008.
For the majority of workers who stayed employed throughout the recession, wages have tended to stagnate relative to inflation. And analysts note that a lot of new hiring is trending toward part-time instead of full-time work.
But we are seeing the job market pick up month by month, said Jill Smith, director of agency development at the Spencer Reed Group, a national recruiting firm based in Overland Park. Were seeing it in all industries.
According to the Conference Board, consumer confidence improved in May to an index reading of 76.2, up from 69 in April. The boards present situation index jumped to 66.7 from 61, and the expectations index rose to 82.4 from 74.3.
The confidence index has vaulted 10 percentage points in some past month-to-month calculations, but the May jump was among the most sizable.
Franco noted that the confidence gains still have a way to go before overcoming the deep pessimism wrought by the Great Recession.
For example, the share of consumers who said present-day business conditions were good was 18.8 percent, up from 17.5 percent a month earlier. But the share who said business conditions were bad was 26 percent. Even though that was down from 27.6 percent in April, the bad group held on to a bigger share than the good.
Consumers were a bit more optimistic in their short-term outlook.
Those expecting business conditions to improve over the next six months increased to 19.2 percent from 17.2 percent, while those expecting business conditions to worsen decreased to 12.1 percent from 14.8 percent, the Conference Board said.
Optimism jockeyed with pessimism throughout the report. Respondents expecting more jobs in the next few months rose to 16.8 percent from 14.3 percent, while those expecting fewer jobs declined to 19.7 percent from 21.8 percent.
The Stars Steve Everly, Mark Davis and Kevin Collison contributed to this report. To reach Diane Stafford, call 816-234-4359 or send email to firstname.lastname@example.org.