NEW YORK (CNN/Money) - A closely watched measure of consumer confidence in the United States surged in January, according to a published report Friday, beating Wall Street expectations.
The University of Michigan's preliminary consumer sentiment index for January jumped to 103.2 from 92.6 in December, according to market sources quoted by Reuters. Economists, on average, expected a reading of 94, according to Briefing.com.
It was the highest level for the index since 107.6 in November 2000, months before the official beginning of the last recession in March 2001.
"We've been trying to see whether the improvement of the economy and financial market will carry the day in terms of consumer confidence, or if worries about labor will dominate," said Ethan Harris, chief economist at Lehman Brothers. "It looks like the 'glass-half-full' view is winning."
The university's current conditions index, which measures the way consumers feel about the present state of the economy, surged to 108.9, the highest since 110.5 in December 2000, from 97 in December.
The expectations index, measuring consumer's hopes for the near future, rose to 99.5 from 89.8 in December.
Somewhat surprisingly, U.S. stock prices gave up earlier gains after the news, but continued to trade slightly higher. Treasury bond prices were mostly higher.
Consumers carry some weight
Wall Street pays close attention to consumers, whose spending makes up more than two-thirds of the total economy. Fueled by tax rebate checks and cash from a wave of mortgage refinancing, consumers hit the malls with gusto in the third quarter, pushing economic growth to the fastest annual pace in nearly 20 years.
But those stimulative effects faded in the fourth quarter, and the pace of consumer spending growth slowed down.
Though non-farm payrolls have added jobs for five straight months, the unemployment rate has declined since peaking in mid-summer, and the stock market has recovered steadily, consumer confidence measures have not fully recovered, reflecting some lingering anxiety about the job market.
And some economists worry that consumers are too saddled with debt and have eaten away at their savings, leaving them less inclined to go on any spending sprees.
In any event, consumers don't always spend the way they feel. Confidence plunged after the terror attacks of Sept. 11, 2001, for example, but consumers still managed to make their way to auto dealers and buy cars at zero-percent financing.
"We don't change our personal consumption forecasts around [the Michigan sentiment index]," Harris said. "But it's a good sign -- I think the consumer will trudge along here, even if they are saddled with high debts."
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