Consumer Confidence Rebounds

Consumer Confidence Up
CBS/AP
Consumer confidence emerged from a funk. With gasoline prices moderating, people are feeling better — but not ebullient — about the economy's prospects and their own.

The RBC CASH index, based on polling by Ipsos, showed that consumer confidence rebounded in November to a reading of 81. That marked an improvement from October's 66.8 and September's showing of 61.5, the lowest since early March 2003, when the nation was on the brink of war.

The low confidence readings seen in the previous two months reflected public horror and anxiety over the deadly hurricanes that ravaged the Gulf Coast, destroying businesses and choking commerce. The storms hobbled crucial oil and gas facilities, sending oil prices past $70 a barrel and gasoline prices above $3 a gallon.

Those price surges have calmed down. Oil prices are hovering below $58 a barrel and gasoline prices are averaging about $2.35 a gallon.

Analysts say that is helping to lift consumers' spirits.

"The fact that prices have come down makes people feel better and they think the future looks better," said Bill Cheney, chief economist at John Hancock Financial Services. The fading sense of dismay about the hurricanes — at least for the people not directly uprooted by them — was cited as a reason for the revival in consumer confidence in November.

"Consumers seem to have rebounded from the low point of spirits this year reached right after the hurricanes struck," said Lynn Reaser, chief economist at Bank of America's Investment Strategies Group. "But they are still somewhat anxious about the energy situation and how that will fare in the coming months."

Even with the rebound, consumers' confidence in the economy in November is still lower now than it was for the same month last year. In November of 2004, confidence stood at 89.8.

Worries about home heating bills, which are expected to soar because of high natural gas costs, are probably restraining confidence compared with a year ago, economists said.

The confidence index is benchmarked to a 100 reading on January 2002, when Ipsos, an international polling firm, started the gauge.

Economists monitor confidence for indications about consumers' willingness to spend, which plays a major role in shaping the strength of overall economic activity in the United States.

In the third quarter, consumers spent briskly, helping the economy grow at a solid 3.8 percent pace.

Analysts believe consumer spending in the current October-to-December will be weak, mostly reflecting a cutback in spending for cars and trucks as generous incentives lapse. However, that should be offset from gains elsewhere, allowing the economy to grow at a respectable pace of around 3 percent in the fourth quarter, some analysts predict.

On the confidence front, the biggest over-the-month improvement came from a measure looking at consumers' economic expectations over the next six months, including conditions in areas where they live or work and their own financial situations.

The "expectations" measure rose to 44.5 in November, up considerably from an anemic 0.9 percent in October. Even with the pickup, people's expectations in November were still much weaker than a year ago, when this gauge stood at 69. Rising borrowing costs and mortgage rates could be a factor, analysts said.

Consumers' feelings about jobs remained surprisingly high, at 119.8 in November, and 119.5 in October. A year ago, this measure clocked in at 111. Last week the government reported disappointing job growth of just 56,000 in October, but analysts expect stronger showings in the months ahead.

A measure tracking consumers' sentiments about current economic conditions came in at 91.1 in November, up slightly from 90.7 in October. A year ago, this gauge stood at 97.4.

Consumers' sentiments about making a purchase, saving and other investment decisions increased to 82.8 in November, from 78 in October. A year ago, this measure was at 90.4.

The overall consumer confidence index for November was based on the results of 1,000 adults surveyed Monday through Wednesday about their attitudes on personal finance and the economy. Results of the survey had a margin of sampling error of plus or minus 3.1 percentage points.