Optimism for ’11 pushes consumer confidence higher

Optimism for ’11 pushes consumer confidence higher

NEW YORK – Americans’ confidence in the economy rose to a five-month high in November, showing increased optimism for the first half of next year.

The report offered some comfort to the nation’s retailers during the holiday shopping season, but shoppers still remain downbeat as they grapple with a high unemployment rate. Moreover, the latest report on housing, released Tuesday, showed that home prices weakened in September.

The Conference Board, a private research group based in New York, said Tuesday that its Consumer Confidence Index rose to 54.1 in November, up from a revised 49.9 in October.

The November reading is the highest since June, when the index stood at 54.3 just as the economy’s recovery started to lose momentum. Economists surveyed by Thomson Reuters expected 52.0.

It takes a level of 90 to indicate a healthy economy, which hasn’t been approached since the recession began in December 2007.

One component of the index, how Americans feel now about the economy, rose to 24.0, up from 23.5. The other gauge, which measures how American feel about the economy over the next six months, rose to 74.2, up from 67.5 last month.

“Consumer confidence is now at its highest level in five months, a welcome sign as we enter the holiday season,” Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement. “Consumers’ assessment of the current state of the economy and job market, while only slightly better than last month, suggests the economy is still expanding, albeit slowly. Hopefully, the improvement in consumers’ mood will continue in the months ahead.”

Others were less optimistic.

“The rise in consumer confidence in November is not consistent with a sustained acceleration in consumption growth at a time when income growth is weak, the unemployment rate is high and a double dip in house prices is underway,” said Paul Dales, U.S. economist at Capital Economics.

He added that the rising stock market appears to offset the increase in gas prices toward $3 a gallon.

The Dow Jones industrial average fell 45.07, or 0.5 percent, to 11,007.42 in morning trading Tuesday as investors shrugged off the Confidence Report and focused on the latest housing data and Europe’s debt struggles spreading to Portugal, Spain and Italy.

The Consumer Confidence index, which measures how respondents feel about business conditions, the job market and the next six months, has recovered fitfully since hitting an all-time low of 25.3 in February 2009. By October 2009, it had risen to 48.7 and has since hovered in a tight range between the mid-40s and the high 50s. May 2010 was the only month when the index topped 60.

Economists watch confidence closely because consumer spending accounts for about 70 percent of U.S. economic activity and is critical to a strong rebound. The improved confidence mirrors an increase in spending in November, fueled by early discounting on holiday goods that lured shoppers into stores.

Preliminary results for the Thanksgiving weekend also showed a solid start to the holiday shopping season. Americans, however, are still cautious about spending and are sticking to budgets amid job worries. And the worry is that shoppers will procrastinate even more this holiday season compared with last year as they wait until the last minute for the best deals.

There have been some encouraging signs. Americans’ income rose 0.5 percent in October, boosted by a 0.6 percent rise in wages and salaries, according to a government report released last month. That was after incomes didn’t rise at all in September.

At the same time, the pace of layoffs is slowing. Initial jobless claims dropped by 34,000 to a seasonally adjusted 407,000 in the week ending Nov. 20, the Labor Department said. Claims have fallen in four of the past six weeks.

But the housing market is worsening, after an uptick in the spring helped by government subsidies. The report from a widely watched housing price index underscored the deterioration, as it showed home prices are falling faster in the nation’s largest cities. It also said a record number of foreclosures are expected to push prices down through next year.

The Standard & Poor’s/Case-Shiller 20-city home price index fell 0.7 percent in September from August. Eighteen of the cities recorded monthly price declines.

The Conference Board’s index, based on a random survey mailed to 5,000 households from Nov. 1 to Nov. 19, showed that worries about jobs eased, but concern remains high.

Those stating jobs are “plentiful” increased to 4.0 percent from 3.5 percent, while those saying jobs are “hard to get” edged up to 46.5 percent from 46.3 percent.

Consumers were also a little more positive about future job prospects. Those expecting fewer jobs in the months ahead declined to 18.8 percent from 22.3 percent, while the percentage expecting more jobs rose to 15.5 percent from 14.5 percent. The proportion of consumers expecting an increase in their incomes increased to 10.6 percent from 9.7 percent.


AP Real Estate Reporter Janna Herron in New York contributed to this report.

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