This was widely expected at the conclusion of the Iraqi war, said Jim Haughey, senior economist for Newport Communications. He said it doesn't change the economic outlook for a return this quarter to 3% plus GDP growth and slightly stronger growth next year.
"Expect this to be followed in the next few months by generally brighter reports on spending activity in most economic sectors," Haughey said.
A similar surge occurred at the end of the Gulf War in 1991. The economy is stronger in 2003 than in 1991, so the surge in confidence can be expected to more quickly lead to added spending and freight, he said.
So far the index is only back to the October-January level -- well short of the 110-120 index reports in early 2002. Since the survey was conducted as the war was ending, the full positive impact of the success in Iraq was not in the April data. More improvement is likely in May.
Consumer durables, business purchases of cars and trucks and non-electronic equipment took the biggest hit when the index dipped in the pre-war period, so they will be the major beneficiaries of higher confidence, Haughey said.