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Rising consumer confidence could bode well for stocks

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Rising consumer confidence could bode well for stocks

The economy has been floundering lately, but analysts believe consumer confidence edged back toward a 7 ½-year high this month. And that should be a positive harbinger for retail spending and stocks. On Tuesday, the Conference Board releases its consumer confidence index for April. Economists surveyed by Bloomberg estimate that it rose to 102.5 from 101.3, drifting closer to January’s 103.8, which was the highest reading since August 2007.AP HOLIDAY SHOPPING A USA CA

A strong dollar and cheap oil have hurt U.S. exports and energy company investments, hobbling factory activity,  capital spending and corporate earnings. Economic growth in the first quarter, which the government is slated to report Wednesday, likely totaled just 1% at an annual rate, economists estimate. But consumers are typically unfazed by such indicators. And while March job gains of just 126,000 — a 15-month low — undoubtedly tainted consumer’s perceptions in April, continued low gasoline prices likely more than offset that, IHS Global Insight wrote in a note to clients.

That would be good news for markets. Economists are depending on consumer spending to lift the economy from its doldrums in coming months. Low gas prices haven’t yielded much of a dividend so far, with consumers pocketing most of their savings. But Julian Jessop, chief global economist at Capital Economics, says that’s largely because harsh weather kept shoppers from venturing to the mall.

Milder weather and a more cheerful consumer should foreshadow stronger spending in the months ahead. And since consumption  makes up more than two thirds of economic activity, splurging Americans could more than offset the strong dollar’s drag on company earnings and stocks.


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