ANN ARBOR—Consumer spending is expected to remain strong in 1997 due to the continued high levels of consumer confidence, according to Richard T. Curtin, director of the University of Michigan’s Surveys of Consumers.

Curtin, who reported his findings Nov. 21 at the U-M’s 44th annual Economic Outlook Conference, said that consumer confidence has remained quite favorable and points toward continued strength in consumer spending during the year ahead. The Index of Consumer Sentiment was 96.5 in the October 1996 survey, reaching its highest level in nearly two years.

Consumers pointed to several favorable developments when asked to describe changes in their financial situation. ” Income gains were reported by nearly one-in-three households, and most expected income and job prospects would remain favorable in the year ahead,” he said.

” The majority of consumers expected the unemployment rate would remain largely unchanged at its current low level during the year ahead,” he added.

” Importantly, consumers expect the inflation rate to remain largely unchanged at its current low level during the next several years.” Curtin reported that in the October 1996 survey, consumers expected a 3 percent inflation rate during 1997.

Overall, most consumers expected their financial situation to remain favorable in the year ahead. ” One of the most important findings is that just one-in-ten households expected their financial situation to worsen next year,” reported Curtin.

More consumers in the October 1996 survey expected the economic expansion to continue uninterrupted than to be halted by recession within the next five years. Such favorable long-term prospects have rarely been recorded during the past 20 years.

” It is important to emphasize that consumers do not expect the pace of economic growth to quicken during 1997,” Curtin added. Most consumers expected the economy to continue to improve at the same pace as now. ” The most important aspect of the outlook for consumers is that the growth in the economy will be strong enough to keep the unemployment rate at its current low level during the year ahead.”

Attitudes toward buying conditions for homes, vehicles, and large household durables all remained at quite favorable levels in the October 1996 survey. Curtin reported, ” The outlook for consumer spending next year is quite favorable.”

At the present time, consumers are concerned about potential increases in the cost of credit. ” Most consumers expected the increases in credit costs to be small, however. In addition, consumers have continued to emphasize the improvements in their incomes in making spending decisions,” said Curtin.

Curtin also indicated that the surveys have uncovered more fundamental changes in consumer attitudes. ” In important ways, consumers have changed how they interpret and react to changes in economic conditions. They now act in ways that helps the economy to avoid recessionary downturns.

” To keep their spending in line,” he explained, ” consumers now avoid products and retailers that don’t offer the lowest prices, more frequently adjust the pace of their spending to keep it in line with their income, and are more willing to temporarily delay spending to avoid higher interest rates.”

Theses changes now make recessions less likely, but it does not rule out the possibility, Curtin said. ” The major threat to this favorable outlook would be a renewed rise in concerns about future income and employment prospects. This could happen if economic growth is weaker than now anticipated.”

U-M News and Information Services University of Michigan