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5-Year High In Consumer Confidence Bodes Well For Economy

If consumers are feeling better, they may be more apt to spend — which could mean better job growth down the road.
Jessica Rinaldi
Reuters /Landov
If consumers are feeling better, they may be more apt to spend — which could mean better job growth down the road.

The economy "is unlikely to slow in the short-term, and may even moderately pick up," economist Lynn Franco predicted Tuesday as the Conference Board released its latest survey on consumer confidence.

The business research group, where Franco is director of economic indicators, said its index rose to a five-year high of 81.4 in June — up from May's 74.3. The index is based on surveys of Americans.

According to Franco, the index rose in large part because "consumers are considerably more positive about current business and labor market conditions than they were at the beginning of the year."

If consumers are feeling better about how things are going, that's good news for the economy because it suggests that in coming months Americans will be more willing to spend. That spending, in turn, could help spur job growth — and, potentially, create a "virtuous circle" in which stronger confidence boosts spending, which boosts hiring, which boosts confidence ... and so on.

There were other positive economic indicators released Tuesday, including:

-- Word from the Census Bureau and Department of Housing and Urban Development that sales of new homes rose 2.1 percent in May from April, and were up 29 percent from May 2012.

-- Another report from the Census Bureau said orders for so-called durable goods (appliances, equipment and other long-lasting products) rose 3.6 percent in May from April.

Stocks are trading higher in New York following this news. As of 11 a.m. ET, the Dow Jones industrial average was up about 112 points (0.75 percent) from Monday's close.

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