The New York-based Conference Board said Tuesday that its Consumer Confidence Index rose to 97.3 this month from a revised 94.6 in December. Analysts were expecting a reading of 96.
The industry group's index, based on a monthly survey of some 5,000 U.S. households, is closely watched because consumer confidence drives consumer spending, which accounts for about two-thirds of the nation's economic activity.
Franco said the upturn in confidence was driven by the feeling that the business outlook and job prospects are going to get better.
The index compares results to its base year, 1985, when it stood at 100. The November figure was the lowest since February 1994, when it reached 79.9.
Earlier Tuesday, the Commerce Department reported that orders to U.S. factories for costly goods rose a bigger-than-expected 2 percent in December, suggesting the nation's battered manufacturing sector is beginning to emerge from a 17-month slump.
Both reports suggested that better days lie ahead for the economy, which officially slipped into recession in March.
To keep the economy afloat, the Federal Reserve cut interest rates 11 times last year, helping to push the prime lending rate, a benchmark for many consumer and business loans, to its lowest level since November 1965.
Fed Chairman Alan Greenspan told Congress last week that he see signs of a recovery, prompting many analysts to predict that Fed policy-makers will leave interest rates unchanged after a two-day meeting that begins Tuesay and ends Wednesday.
The Conference Board said consumers' assessment of the current economic climate was mixed in January. Consumers rating current business conditions as good increased to 18.4 percent from 17.3 percent in December.
But consumers who felt business conditions were bad rose to 22.4 percent from 21.7 percent last month.
Nonetheless Americans are still feeling optimistic about their economic prospects for the next six months. The percentage of consumers who expect business conditions to improve climbed to 25 percent from 22.2 percent in December, the report said. Those expecting conditions to sour dropped to 9.6 percent from 11.6 percent.
Consumers' outlook about jobs also improved. In January, 18.8 percent said they expect more jobs to become available in the next six months, compared with 18.5 percent in December. Those expecting fewer jobs to open up dipped to 18.2 percent from 19.3 percent.
The Conference Board is a nonprofit research and business group, with more than 2,700 corporate and other members around the world.
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