u.s. nov. consumer confidence rose by most since 2 U.S. Nov....

u.s. nov. consumer confidence rose by most since 2

U.S. Nov. Consumer Confidence Rose By Most Since 2003 to 98.8

Nov. 29 (Bloomberg) -- Consumer confidence rose in November by the most in more than two years as falling gasoline prices encouraged shoppers before the start of the holiday season.

The Conference Board's consumer confidence index rose to 98.9 from a revised 85.2 in October, the New York-based research group said today. The gauge was at 105.5 in August, before the full effects of the recent hurricanes were measured, and averaged 97.5 over the past five years.

Falling fuel prices after post-hurricane highs are increasing confidence and spending, economists said. Consumers splurged over the Thanksgiving weekend at discount retailers such as Wal-Mart Stores Inc., leading the National Retail Federation to predict this will be the second-biggest holiday selling season since 1999. Job creation is also helping sentiment

``Confidence is gradually recovering,'' said David Sloan, chief U.S. markets economist at 4Cast.com in New York. ``The main issue has been gasoline prices and they've fallen back from their highs.''

The Conference Board compiles its index of consumer confidence by surveying 5,000 households on general economic conditions, their employment prospects and spending plans. A Bloomberg News survey of 58 economists expected the index to rise to 90.2, with estimates ranging from 86 to 95.3. October confidence was originally reported to be 85. The November increase was the most since April 2003.

Expectations

The component of the index that tracks consumers' expectations for the next six months increased to 88.8 from 70.1 in October. The gauge of optimism about the present situation rose to 114 from 107.8, the biggest gain since December 2004.

The share of consumers that said jobs were hard to get fell to 23.2 from 25.3 percent last month. The share who said jobs were plentiful in November rose to 20.8 percent from 20.7 percent.

The percentage of consumers expecting to buy a home increased to 3.1 percent from 2.8 percent. The percentage that plan to purchase major appliances rose to 29.1 percent from 25 percent. The share of those who expect to buy a car fell to 4.9 percent from 6.4 percent.

The results compare with those from the University of Michigan's survey of consumer sentiment, which rose to 81.6 in November from a 13-year low of 74.2 the previous month, according to a report released Nov. 23.

Gasoline

The average retail price for a gallon of all grades of gasoline fell to $2.20 in the week ended Nov. 28 from $3.12 the week ended Sept. 5, just after Hurricane Katrina struck, according to the Energy Department. The latest average price is still 11 percent higher than a year ago. Regular unleaded gasoline was selling for as low as $1.99 a gallon in some Washington, D.C., suburbs such as Woodbridge, Virginia.

The National Retail Federation on Nov. 22 raised its forecast for sales growth during the holiday season, which includes November and December, to 6 percent from 5 percent two months earlier, citing strong October gains and a decline in gasoline prices. At 6 percent, sales growth would lag only last year's 6.7 percent gain and exceed the increases from 1999 to 2003.

``As gasoline prices decrease, consumers are finding a little extra padding in their budgets,'' Rosalind Wells, the group's chief economist, said in a statement. ``Nearly every retail category has seen strong sales growth in the past few months, indicating that retailers will see positive gains as consumers continue to spend this holiday season.''

Holiday Spending

The federation said sales during the Thanksgiving holiday weekend, including those online, rose 22 percent from a year earlier, spurred by discounts and demand for electronics.

Retail spending on Visa-branded credit and debit cards for Nov. 25 and 26, the two days after Thanksgiving and traditionally among the biggest shopping days of the year, rose 11 percent from a year earlier, according to Visa USA.

Retail sales excluding autos rose 0.9 percent in October after a 1.4 percent gain the previous month, the government said Nov. 15. Auto sales fell after soaring during the summer months because of discounts. Disposable income, or the money left over after taxes, rose 1.9 percent in September after declining 1.1 percent the previous month, the government said last month.

``All the leading indicators we look at tell us we are going to have a strong retail season and that is certainly what we are planning for,'' said Douglas Duncan, chief executive of FedEx Freight, a unit of FedEx Corp., in an interview on Nov. 23.

Economic Outlook

Even as consumer confidence is increasing, many Americans still believe the economy isn't doing well. A survey by the American Research Group found that 43 percent of those questioned said the economy was in a recession, while 44 percent said it wasn't. Sixty-two percent said they disapprove of the way President George W. Bush is handling the economy, according to the poll of 1,100 adults conducted between Nov. 19-22. The poll has a margin of error of plus or minus 3 percent.

Job growth has been buoyant even as consumer confidence has lagged. The economy created an average of 161,000 jobs a month from January to October, including the hurricane-related decline in September, the second highest total for this period since 2000.

U.S. stocks rallied this month. The Standard & Poor's 500 Index rose as much as 4.7 percent in November from the start of the year, reaching its highest level since June 2001.

Housing

U.S. home prices rose 15 percent and sales reached an all- time high during the third quarter, the National Association of Realtors said on Nov. 15. The median price of an existing single- family home rose to $215,900 from $188,200 a year earlier, the Washington-based group said in a Nov. 15 report.

Still, sales of previously owned homes fell a greater than expected 2.7 percent in October to the lowest since March, slowed by rising mortgage rates, the National Association of Realtors reported yesterday.

Consumer spending growth is expected to slow to a 1.5 percent annual pace in the fourth quarter, the median forecast in a Bloomberg News survey of economists taken earlier this month, from a 3.9 percent rate in the third quarter.

Economic growth may slow to a 3 percent pace in the fourth quarter after a greater-than-expected 3.8 percent pace in the third quarter, according to the Bloomberg survey. Growth may pick up to a 3.6 percent annual rate in the first quarter of 2006, the forecasts showed.

Consumer confidence may suffer if the Federal Reserve keeps raising interest rates after 12 consecutive increases. The Fed is expected to raise its benchmark rate once more this year, to 4.25 percent on Dec. 13, and then by another half percentage point by the middle of next year, according to a Bloomberg survey.

Layoffs at companies trying to improve competitiveness may also hurt consumer confidence, economists say.

Detroit, Michigan-based General Motors Corp., the largest automaker, said Nov. 21 it would close 12 North American operations and purge 30,000 jobs by 2008, in its deepest round of cuts since 1991. The cuts included 25,000 jobs mainly through attrition and buyouts that were announced in June.


Last Updated: November 29, 2005 10:01 EST