New York – Consumer confidence has nearly recovered from the beating it took from Hurricane Katrina and other severe storms, boding well for spending in 2006.
The Conference Board said Wednesday that declining gasoline prices and improving job opportunities boosted its Consumer Confidence Index to 103.6 in December from 98.3 in November. That was better than the 103.0 reading analysts had expected.
The index plummeted after Hurricane Katrina on Aug. 29 devastated Gulf Coast states and disrupted fuel and trade for much of the nation, but now it is approaching the 105.5 reading preceding the storm.
The report is closely watched because consumer spending drives about two-thirds of the U.S. economy, and gains in sentiment tend to precede increases in spending.
Gary Thayer, chief economist for A.G. Edwards & Sons Inc. in St. Louis, said it was “encouraging that confidence has bounced back after the hurricanes, and it suggests the economy has some good momentum going into the new year.” Still, he expects overall economic growth to slow from about 3.5 percent this year to 3.2 percent in 2006 and 3 percent in 2007.
Higher interest rates are likely to dampen consumer borrowing and weaken the housing market.
