Consumer outlook not as sour as suspected

ANN ARBOR, Mich. – Confidence among U.S. consumers fell less sharply this month than initial estimates indicated, though it still was at the lowest level since just after Hurricane Katrina, based on final results released today by the November Reuters/University of Michigan Surveys of Consumers, Bloomberg News said. The final survey report reflects about 500 responses, up from 300 in the initial estimate.
The Consumer Sentiment Index fell to 76.1 points this month, a decline of 0.5 percent from its October level of 80.9 but an increase of 1.5 percent from the initial November estimate of 75.0. It remained the second-lowest reading – after the October 2005 score of 74.2 – since the presidency of George H.W. Bush.
Analysts had expected the index to remain at the initial estimate of 75.0 points, based on the median score from a Bloomberg News survey of 57 economists. (Their estimates ranged from 72.0 points to 81.0.)
Soaring gasoline and fuel-oil prices and the lingering housing slump combined to sour consumers’ moods and leave them with less spending money on the eve of the holiday shopping season – bad news for the retailers who comprise more than two-thirds of the nation’s economy.
The survey found consumers expect the U.S. inflation rate a year from now to be 3.4 percent, up from the 3.1 percent predicted in the October survey.
“We’re facing extreme price increases in energy, and it’s clear the consumer is becoming more aware of the pressures being put on them,” Lindsey Piegza, an analyst at FTN Financial in New York, told Bloomberg News. “I don’t expect a collapse in spending but it will be very weak for the holidays.”
The Reuters/University of Michigan Surveys of Consumers report is produced each month by the University of Michigan and distributed by Reuters. Additional information is available at www.sca.isr.umich.edu.