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Confidence hits three-year high
Conference Board survey shows improved outlook on business conditions, jobs; May revised higher.
June 28, 2005: 2:09 PM EDT

NEW YORK (CNN/Money) - Consumer confidence jumped to the highest level in three years in June, coming in above most economists' forecasts, according to a report from a business research group Tuesday.

The Conference Board said its June reading on confidence rose to 105.8 from a revised reading of 103.1 in May.

Economists surveyed by Briefing.com had forecast a rise to 104 from the original reading of 102.2 in May.

"The improvement in consumers' mood suggests that business activity and labor market activity will continue to pick up over the next several months," Lynn Franco, director of the Conference Board's consumer research center, said in a statement.

"With consumers in better spirits, and job concerns remaining relatively steady, there is little reason to expect a dramatic shift in consumers' spending."

Consumer confidence is watched closely since consumer spending fuels more than two-thirds of economic activity. While corporations have been cautious with business spending, robust consumer spending has helped spur faster economic growth over the past two years.

But with short-term interest rates rising and oil prices at record highs, some economists say consumers may feel pressured to moderate spending in the months ahead.

"At this level the index is consistent with spending growth of about 3.5 percent, in line with recent economic data. But watch out for a dip next month in the wake of the renewed spike in gas prices," Ian Shepherdson, chief economist with High Frequency Economics, wrote in a report. "Overall, though, quite robust."

In its survey, the Conference Board said, people calling business conditions "bad" in June edged down to 15.5 percent of the total from 16.4 percent, while those claiming conditions are "good" was virtually unchanged at 26.9 percent.

The employment outlook also improved, with the percentage of consumers who believe jobs are "hard to get" decreasing to 22.9 percent from 24.1 percent. But the percentage of those claiming jobs are "plentiful" was virtually unchanged at 22.6 percent.

For the first time in nearly three years, the percentage of consumers saying jobs are "hard to get" did not exceed the percentage saying jobs are "plentiful."

Consumers were also increasingly optimistic about the six-month outlook. Those anticipating business conditions to worsen eased to 9 percent from 9.5 percent, while those expecting business conditions to improve was virtually unchanged at 19.2 percent.

The survey also showed that the proportion of consumers anticipating their incomes to increase in the months ahead jumped to 19.4 percent from 17.8 percent last month.

The survey is based on a sample of 5,000 U.S. households.

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