Tuesday, November 24, 2009

Consumer confidence improves slightly in November

In the November 24, 2009 article "Consumer confidence improves slightly in November," Associated Press retail writer Anne D'Innocenzio explains that economists look to consumers to reviving the lagging U.S. economy because their purchases account for about 70% of overall demand for newly produced goods and services:
NEW YORK – Americans' confidence in the economy improved slightly in November from October, but shoppers remain gloomy heading into the traditional start of the holiday shopping season amid a weak job market, according to a monthly survey.

The Conference Board, based in New York, said Tuesday that its Consumer Confidence Index edged up to 49.5, up from a revised reading of 48.7 in October. Economists surveyed by Thomson Reuters expected a reading of 47.7.

The index, which hit a historic low of 25.3 in February, had enjoyed a three-month climb from March through May, fueled by signs that the economy might be stabilizing. The road has been bumpier since June as rising unemployment has taken a toll on consumers. A reading above 90 means the economy is on solid footing. Above 100 signals strong growth.

One component of the Conference Board's confidence gauge that measures consumers' assessment of the current economy fell slightly to 21.0, compared with 21.1 in October. The other that measures shoppers' outlook over the next six months increased slightly to 68.5 from 67.0 in October.

"Income expectations remain very pessimistic and consumers are entering the holiday season in a very frugal mood," said Lynn Franco, director of The Conference Board Consumer Research Center in a statement.

Economists watch consumer sentiment because spending on goods and services for consumers accounts for about 70 percent of U.S. economic activity by federal measures.

While the reading doesn't always predict short-term spending, it does serve as a barometer of spending levels over time, especially for big-ticket items.

Retail sales showed some signs of life in September and October, with major merchants collectively posting two consecutive monthly gains in sales in more than a year, according to the International Council of Shopping Centers-Goldman Sachs Index.

That followed more than a year of declines as shoppers shut their wallets tight. But business still remains weak and shoppers are still focused on necessities like socks, coats and underwear.

Experts say depressed spending is likely to persist for several years amid stubbornly high unemployment. The unemployment rate is now at 10.2 percent, the highest in 26 years, and 15.7 million Americans out of work. Meanwhile, the housing market has showed signs of improvement, but overall the sector is still tepid.

A housing report announced Tuesday showed home prices improved for the fourth straight month in September, though only in 11 out of 20 major metropolitan areas.

The Standard & Poor's/Case-Shiller home price index, which tracks prices in 20 major metropolitan markets, rose 0.3 percent in September.

The Conference Board's confidence survey, which is based on a representative sample of 5,000 U.S households, showed that shoppers' assessement of the job market remains weak. The cutoff for the preliminary results wsa Nov. 17. Those claiming jobs are "hard to get" increased to 49.8 percent from 49.4 percent, while those claiming jobs are "plentiful" decreased to 3.2 percent from 3.5 percent.

Consumers' short-term outlook improved slightly in November, but that's because those expecting conditions to worsen decreased to 15.1 percent from 18.2 percent, Franco said. The percentage of consumers expecting an improvement in business conditions over the next six months decreased slightly to 20.0 percent from 20.8 percent.

Those anticipating more jobs in the months ahead declined to 15.2 percent from 16.8 percent. But those expecting fewer jobs declined to 23.1 perent from 26.1 percent. The proportion of consumers expecting an increase in their incomes decreased to 10.0 percent from 10.7 percent.

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