2003

Spending, Optimism on the Rise

May 2003

As the war with Iraq ended, U.S. consumer confidence surged in April even more dramatically than it did following the Sept. 11, 2001, attacks, according to several recent indicators.

In a rare flurry of encouraging news about the American economy, several recent reports show that consumers are spending more money and are somewhat more confident about the future.

Retail sales, which fell 1.3 percent in February, rebounded 2.1 percent in March, according to the Commerce Department.

The gain was the largest advance since October 2001 and surprised economists, who had projected a mere 0.6 percent retail sales increase in March.

In another report, the University of Michigan's index of consumer sentiment jumped to 83.2 in early April, from a nine-year low of 77.6 in March. Analysts attribute the improved mood of consumers to the successes in the war in Iraq as well as a sharp decline in energy prices, according to the New York Times.

The Labor Department, meanwhile, says prices rose 1.5% in March, allowing the core index to rise 0.7%. According to the Times, the increased prices indicate the economy is on the mend.

The Economic Optimism Index also jumped 7.6 points to 56.4 in April, a 10-month high breaking a decline that began in June 2002. The month's 15.5 percent jump in the index was the biggest ever, even surpassing the October 2001 leap of 10.6 percent.

The share of Americans who think the economy will enter a recession fell to 19 percent in April, down from 26 percent in March. Additionally, the share of those who believe the war with Iraq will help the economy rose to 31 percent in April, compared to 26 percent in March. And 41 percent of Americans think the economy will slow but not fall into recession.