Consumer confidence on the rise despite sequester battle

By Bernie Becker - 02/26/13 11:47 AM ET

Consumer confidence jumped up in February, according to a new private sector estimate, as consumers recovered from the economic scare of the “fiscal cliff.”

The Conference Board’s consumer confidence index increased to 69.6 this month, up from a revised 58.4 in January. The February figure exceeded projections, and comes after the index had declined during the protracted fiscal-cliff debate.

Lynn Franco, the director of economic indicators at the Conference Board, chalked the increase up to consumers coming to terms with the expiration of the payroll tax cut, and said that people were becoming more confident about the current job market and business conditions.

The increase in consumer confidence also came at the same time reports found continuing signs of an improving housing market. In all, the confidence index for current conditions improved to 63.3, while the expectations index rose to 73.8.

“Looking ahead, consumers are cautiously optimistic about the outlook for business and labor market conditions,” Franco said in a statement. “Income expectations, which had turned rather negative last month, have improved modestly.”

But at the same time, that increased confidence about future conditions is coming just as Washington is locked in another partisan fiscal stalemate. Without congressional action, some $85 billion in automatic spending cuts will start going into effect on Friday.

Polling has shown that people in the United States generally don’t know much about the sequester cuts, with a new Washington Post-Pew Research poll finding that less than one in five believe they have a good grasp on the issue. Voters have also seen Washington make a string of last-second fiscal deals just ahead of a deadline.

The White House has warned that sequestration would be deeply harmful to the economy, citing projections from the Congressional Budget Office that the cuts could mean 750,000 fewer jobs this year.

Many Republicans have also said the cuts are poorly designed and would be harmful, but the two sides disagree on whether new tax revenues should be used to replace the cuts and appear far apart on a potential solution.

Democrats have acknowledged that the pain from the automatic cuts may not be felt immediately, something Republicans could latch on to as they try to make their case for more spending cuts.