US consumer confidence rises to 17-year record level

American consumers are the most confident they've been since 2000.

The Conference Board said Tuesday its consumer confidence index rose to 130.8 in February, highest since November 2000 and up from 124.3 in January.

The business research group's index measures consumers' assessment of current conditions and their outlook for the next six months. They feel better about today's economy than they have since March 2001. Their outlook also improved.

Tax cuts passed into law last year are starting to show up in workers' paychecks. "As people slowly absorb the details of the tax reform package, opinion polls suggest that it is becoming significantly more popular," Stephen Stanley, chief economist at Amherst Pierpont Securities, wrote in a research note.

A strong job market is also boosting confidence. The unemployment rate has stayed at a 17-year low 4.1 percent.

Consumers shrugged off volatility in the stock market.

"Overall, consumers remain quite confident that the economy will continue expanding at a strong pace in the months ahead," says Lynn Franco, the Conference Board's director of economic indicators.

The share of survey respondents saying business conditions were "bad" fell 2.2 percentage points to 10.8 percent, while those saying jobs were "plentiful" jumped 2.2 points to 39.4 percent.

Consumers expecting business conditions to improve over the next six months gained 4.3 points to reach 25.8 percent and those expecting higher incomes in the months ahead rose to 23.8 percent, up 3.2 percentage points.

With US unemployment at historic lows and expected to fall further, employers are struggling to fill open positions and some are beginning to increase wages.

Corporations have also attracted publicity by announcing employee bonuses tied to December's sweeping corporate tax cuts. Economists however warn this does not mean workers will primarily benefit.

Ian Shepherdson of Pantheon Macroeconomics said changes in consumer confidence often lagged behind movements on Wall Street, meaning this month's selloff on stock markets may not yet be reflected in the index.

Still, the readings "appear consistent with rocketing consumers' spending," he said in a research note.

Shepherdson however noted that, with incomes growing only two percent on an annual basis and savings at record lows, "the 4.5 percent growth in spending apparently signaled by the confidence numbers just can't happen."

Economists watch the Conference Board report closely because consumer spending accounts for about 70 percent of U.S. economic output.

The overall index hit bottom at 25.3 in February 2009 at the depths of the Great Recession before rebounding as the U.S. economy recovered.