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NEW YORK -- Consumer confidence neared its highest level in five years this month, as an expanding job market put extra cash in American's pockets, according to a Bloomberg News report.
The Conference Board's consumer confidence index rose to 110.3, from a revised 110 in December, the New York-based group announced yesterday. Forecasts for a Bloomberg News survey of 64 economists ranged from 106 to 116, with the median reaching 110, an increase form the originally reported 109 index in December.
The confidence is evident through stronger consumer spending. Meanwhile, cheaper fuel costs eased inflationary pressures. This combination explains why the Federal Reserve will have little reason to raise or lower interest rates from the current 5.25 percent, Bloomberg News reported.
"Labor market conditions are good and the consumer feels good about that, which suggests they're going to continue to spend at a healthy clip,'' said Jonathan Basile, an economist at Credit Suisse Holdings in New York. "Spending is showing no signs of faltering, and that quells fears that the economy will slip because of the housing market."
December saw an additional 167,000 jobs, more than what economists estimated. The unemployment rate stayed unchanged at 4.5 percent, a five year low, while workers average hourly earnings rose .5 percent, the highest in eight months. American's expectations about their financial situation six months in the future eased for the first time since August, the Conference Board reported.
"Households are likely to remain active and supportive of the economy,'' said Michael Moran, chief economist at Daiwa Securities America Inc. "The expectations component is still at a respectable level.''
In addition, declining fuel prices are leaving extra cash on hand for many Americans to spend on other goods. The price of a gallon of gas fell to $2.23 on Jan. 15 from $2.29 a month prior, Bloomberg News reported.
A Commerce Department report will outline an economy that grew at a three percent annual rate in the fourth quarter of last year, Bloomberg News' economists forecasted, compared to a 2 percent growth rate seen in the prior quarter.