Consumer optimism climbs

USA Today

"A lot of the fear of a recession has dissipated," says Lynn Franco, who directs the monthly consumer survey for the Conference Board. "Consumers are telling us the economy is growing, although slowly."

The confidence index jumped to 117 in this month, up from a revised 109.2 in February. Analysts had expected confidence to drop to 105. Despite rising for the first time since September, the index is still down sharply from its level of more than 140 last summer.

Yesterday's upturn was the second sign that consumer attitudes might be on the rise after a bleak winter, and it sparked a rally in the stock market. On March 16, another major consumer survey by the University of Michigan showed a similar uptick. In both cases, most or all of the change came from a sharp improvement in how consumers feel the economy will be doing six months from now.

Economists are tracking consumer moods closely to get a sense of whether consumers remain confident enough to keep spending or are so anxious that they'll pull back. Consumer spending accounts for about two-thirds of the economy and can determine whether the United States will fall into recession or escape with just a slowdown.

When the confidence gauge plunged sharply in January, Federal Reserve Chairman Alan Greenspan warned that consumer attitudes were the economy's last firewall against a recession and that a "breach" in confidence would be an ominous sign.

Also yesterday, though, the government reported that orders for big-ticket durable goods, such as aircraft, refrigerators and computers, slipped 0.2 percent in February — a sign that the nation's factory sector is still weak and business investment is feeble.

Although the month-to-month durables gauge can be extremely volatile, economists say the overall trend is distinctly down, particularly for information technology equipment that was a key, fast-growing part of business investment last year.

On the basis of the continuing weakness in business investment, economists are lowering forecasts for economic growth in the first three months of this year to a meager 1 percent annual rate — not quite a recession, but far below the booming 6 percent growth rate of a year ago.

Fed watchers saw conflicting signals in yesterday's data. The consumer rebound made it less likely the Fed will want to cut rates before its next meeting May 15, and the weak durables number made an inter-meeting cut slightly more likely.

In a speech yesterday, Greenspan made no direct comment on the economy or the Fed's plans for additional rate cuts, but suggested fears about health care inflation might be overblown.

Health care is one of the few areas where consumer prices have been rising sharply lately, and some analysts have worried that persistent inflation might limit the Fed's aggressiveness in making further rate cuts.

Recent job cuts

Several major companies have announced job cuts in the past few months, including:

• DaimlerChrysler: 26,000
• Motorola: 22,000
• Lucent Technologies: 16,000
• Verizon: 10,000
• Procter & Gamble: 9,600

• Solectron: 8,200
• Sara Lee: 7,000
• Whirlpool: 6,000
• J.C. Penney: 5,300
• Compaq: 5,000

• Xerox: 4,000
• Nortel Networks: 9,000
• The Walt Disney Co.: 4,000
• Textron: 3,600
• Schawb: 3,400

• Ericsson LM: 3,300
• Gateway: 3,000
• ShopKo Stores: 2,500
• AOL Time Warner: 2,400
• Standard Register: 2,400

• Sears: 2,400
• Electrolux: 2,000
• Service Merchandise: 1,750
• Hewlett-Packard: 1,700
• American Greetings Corp.: 1,500

• Amazon.com: 1,300
• 3Com: 1,200
• Freightliner.: 1,085
• Norfolk Southern: 1,000-2,000

Source: Individual companies