Consumer confidence surged in November. The Conference Board's Consumer Confidence Index was 91.7, up 10.0 points from the revised 81.7 in October, reaching the highest level since September 2002. November's reading surpassed economists' expectations of 85.0. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.
Confidence increased across both portions of the Conference Board index. The Present Conditions index was up 13.1 points to 80.1 in November. This index measures how consumers perceive the current state of the economy.
The Expectations portion of the index, a measure of future economic activity, increased to 99.4 in November from 91.5 in October.
The University of Michigan's Consumer Sentiment Index, a comparable index, also gained in November to 93.7 from 89.6 in October. Both component indices also increased. A Present Conditions index grew 2.6 points to 102.5 in November, while the Expectations portion improved to 88.1 from 83.0 in October.
November gains in consumer confidence are an encouraging sign. Consumers appear to be responding positively to the beginnings of improvement in the national labor market. A stabilizing stock market and stronger business confidence also appear to be contributing to consumer's growing confidence.
There are several factors that could dampen the outlook of consumers. Consumers carry high debt burdens and generally have little pent-up demand for spending. In addition, consumer spending may slow as cash flows from tax rebates and mortgage refinancing fade.
However, if labor markets stabilize and the economy keeps moving toward recovery, confidence should continue to gradually strengthen. Since consumer spending accounts for two-thirds of the U.S. economy, consumer confidence will remain a closely watched economic indicator.
Sources: www.conference-board.com
www.economy.com
