Beating expectations, consumer confidence from the University of Michigan and Thomson Reuters improved in November from what was observed a couple weeks ago. Preliminary data, which was released on November 8, had suggested a continued decline in the Consumer Sentiment Survey. The Conference Board observed a similar decrease in perceptions, with the government shutdown cited as a large factor in reducing overall confidence. Weakened views about future income and labor markets were also noted.
With that in mind, the final report from the University of Michigan was higher than consensus forecasts, with the index up from 73.2 in October to 75.1 in November. (The earlier estimate for November was 72.0.) This suggests that Americans have become slightly more positive about the economy more recently, something that we might have anticipated now that we are beyond the budgetary impasse.
If you are going to have a surprise on consumer sentiment, I would imagine that this one was well-timed for those in the retail sector, with holiday shopping now shifting into high gear. Even with the better data, overall consumer confidence remains lower than it was in July (85.1), which was a six-year high.
An improvement in the expected outlook helped lift the overall index higher, resulting in the increased data point from the preliminary data to the final figure. The forward-looking component of the index rose from 62.5 to 66.8 (versus 62.3 in the earlier estimate). At the same time, the index for current economic conditions edged slightly lower, down from 89.9 to 88.0 (versus 87.2 in the previous release).
The preliminary data for December consumer confidence from the University of Michigan and Thomson Reuters will come out on Friday, December 6. Given the better-than-forecast release for November, we should expect further improvements in sentiment in that report, even if it takes us several months before we reach to return to the levels observed in July again.
Chad Moutray is the chief economist, National Association of Manufacturers.
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