NEW YORK — Consumers’ confidence surged in January to an 18-month high, as better business conditions ahead outweighed lingering concerns over current job prospects.

This story first appeared in the January 28, 2004 issue of WWD. Subscribe Today.

The Conference Board said Tuesday its Consumer Confidence Index reversed course and rose 5.1 points to a lower-than-expected 96.8 in January, which is up from December’s upwardly revised 91.7. This month’s reading stands at the index’s highest level since July 2002, when it reached 97.4.

Consumers interviewed in the monthly survey expressed optimism about their current situation as well as the road ahead, as both components of the index moved in tandem after diverging in December. The “present situation” component of the index, which takes into account consumers’ current views, climbed to 80 from 74.3, reversing last month’s decline. In addition, the “expectations” portion of the index, which assesses consumer attitudes for the next six months, advanced for the fourth straight month to 108.1 from 103.3.

The Consumer Confidence survey is based on a representative sample of 5,000 households.

“Growing optimism about the overall health of the economy continues to bolster consumers’ short-term outlook,” said Lynn Franco, director of the Conference Board’s Consumer Research Center, in a statement.

However, she cautioned that consumers’ assessment of current conditions, which strongly hinges on improvements in the labor market, “remains weak and volatile.”

Highlighting the growing gap between business conditions and employment, 22 percent of the respondents described business conditions as “good” compared with 15 percent in January of last year and 18.6 percent in December. And those describing jobs as “hard to get” dropped to 31.4 percent from 32.4 percent. Yet, respondents who claimed jobs are “plentiful” dropped to 12.4 percent in January from 12.6 percent in December. In January of last year, those surveyed who said jobs were “plentiful” was 14.5 percent.

In a separate report by Moody’s Investors Service, the rating firm’s index of perceived job opportunity showed a decline in December after increasing in October and November.

John Lonski, an economist with Moody’s, said the “glaring weakness [in the survey] is it didn’t show a substantial improvement regarding how consumers assess current job opportunities.”

However, Lonski said a combination of tax cuts, low interest rates, a depreciating dollar and increased federal spending on defense would likely bolster bottom lines and drive business expansions, which could translate into job growth.

“Companies are still reluctant to take on new workers,” Lonski explained. “But if conditions remain good, which I think will be the case, companies will hire more workers.”

Kenneth Goldstein, an economist with the Conference Board, said he believes an improving labor market will continue to brighten consumers’ already optimistic views.

Noting the ongoing pickup in the “expectations” portion of the index, Goldstein said that “indeed, the next change, particularly in the labor market, will be a change for the better. Consumers continue to tell us in the survey the jobs are coming.”

The survey found that respondents expecting business conditions to improve over the next six months climbed to 27.8 percent from 26.7 percent in December, while those expecting conditions to grow worse fell to 6.5 percent from 8.1 percent. Meanwhile, those surveyed who are anticipating more jobs on the horizon rose to 22.2 percent in January from 21.6 percent in December. Respondents expecting an increase in their incomes during the next six months fell to 18.9 percent in January from 21.5 percent in December.

For retailers, the boost in consumer confidence could bode well for business. Emme Kozloff, a senior retail analyst with Sanford C. Bernstein & Co., said this month’s brightening consumer attitudes reflects the positive impact of an improving economy, as well as more optimism about short-term job growth. “We continue to believe that further evidence of improvements in wage growth and the employment picture are needed to boost overall spending levels sustainably, particularly in the discount channel,” the analyst said.