U.S. economic confidence spikes, but could prove temporary

14:14, May 25, 2011      

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Gallup's economic confidence index this week reached its highest level since mid-February, continuing along a positive trend that started in the week after the death of top terrorist Osama bin Laden earlier this month.

Still, confidence could wane if consumer sentiment is not reinforced by additional positive economic reports, Gallup reported on Tuesday.

Indeed, the U.S. economy is by no means out of the danger zone, and a number of factors could thwart confidence: The U.S. and global economies seem to be slowing, according to a number of economic reports. The Dow Jones Industrial Average has been down for three weeks in a row and jobless claims continue to run above 400,000, suggesting that job growth is insufficient to put a dent in the U.S. unemployment rate.

The battle over raising the U.S. federal debt limit seems to be heating up as U.S. Treasury Secretary Timothy Geithner warns of dire financial consequences if Congress does not act. Moreover, there exists a feeling of deja vu as the European debt situation has surfaced once more, as it did about this time a year ago, Gallup said.

The recent heightening in economic confidence may also be the continuation of a "halo effect" from the bin Laden news, reinforced by a surprisingly quick decline in gas prices. So if this spike in confidence turns out to be transitory, these gains could dissipate quickly in the weeks ahead, according to the renowned survey company.


Forty-two percent of Americans rated current economic conditions "poor" in the week ending May 22 -- essentially the same as during the prior two weeks, and an improvement over April. Thirty-seven percent of Americans have said the U.S. economy is "getting better" in each of the past three weeks, the highest level since mid-February.

Readings for the weeks ending May 8 and 15 are similar to those of comparable weeks in 2010. While this trend continued in the week ending May 22, 2011, the percentage of poor responses increased in the week ending May 23, 2010, before returning to trend in the following week. As a result, May 2011 trends seem generally consistent with the trend during the same weeks of May 2010, Gallup said.

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