Consumer confidence rose in November amid receding gas prices, but Americans' views on the economy remain the gloomiest in decades as they grapple with massive layoffs, slumping home prices and dwindling retirement funds.
The New York-based Conference Board said Tuesday its Consumer Confidence Index now stands at 44.9, up from a revised 38.8 in October. Last month's reading was the lowest since the research group started tracking the index in 1967.
Economists surveyed by Thomson Reuters expected the November reading to slip to 37.9. Still, the November figure is about half of what it was a year ago, and hovers around levels not seen since December 1974, when the index was 43.2.
The Present Situation Index declined to 42.2 from 43.5 last month. The Expectations Index, which is consumers' assessment of the economy over the next six months, increased to 46.7 from 35.7 in October.
"The persistent declines in the Present Situation Index suggest that the economy has weakened further in the final months of this year," Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement. "But despite the improvement in the Expectations Index this month, consumers remain extremely pessimistic, and the possibility that economic growth will improve in the first half of 2009 remains highly unlikely."
“Consumers remain extremely pessimistic. The possibility that economic growth will improve in the first half of 2009 remains highly unlikely.”Lynn Franco, Conference Board
Wall Street closely monitors sentiment as consumer spending represents about two-thirds of all economic activity.
Shoppers' pessimistic mood is a big challenge for the nation's stores, which are preparing for the official start of the holiday shopping season.
The season, which accounts for as much as 40 percent of annual profits for many stores, already was expected to be the weakest in decades, but the spending outlook has darkened further since September as consumers have slammed on the brakes while they grapple with the fallout from the escalating financial crisis.
That includes rising layoffs across all sectors of the economy, and rapidly declining household wealth.
Mall-based apparel and department stores have seen their business dramatically deteriorate since September from an already slow pace, while the harsh environment has led to liquidations of several chains including Mervyns LLC and Linens 'N Things. Circuit City Stores Inc., the nation's second largest consumer electronics chain, filed for Chapter 11 bankruptcy protection this month.
Among the few bright spots are discounters and warehouse clubs, like the world's largest retailer Wal-Mart Stores Inc. and Costco Wholesale Corp., as Americans focus on necessities like food and gas.
Mark Vitner, a senior economist at Wachovia Corp., predicts that total retail sales for the combined November-December period will drop by 0.5 percent, the first decline since the 1982 holiday shopping season, when consumers were dealing with massive layoffs.
Meanwhile, a report on home prices released Tuesday and a downbeat earnings report from homebuilder D.R. Horton, showed further deterioration in the housing market, another sign that doesn't bode well for consumer spending.
The Standard & Poor's/Case-Shiller U.S. National Home Price Index said that home prices tumbled a record 16.6 percent during the third quarter from the same period a year ago. Prices are at levels not seen since the first quarter of 2004.
Fort Worth, Tex.-based D.R. Horton Inc. reported a nearly $800 million loss in its fiscal fourth quarter on slower home sales and more than $1 billion in charges amid a battered housing market.
Job security, however, is a top worry among shoppers. The Labor Department reported last month that unemployment in October soared to a 14-year high of 6.5 percent, as American employers shed 240,000 jobs.
Economists expect the employment market to further deteriorate when the government reports November figures on Dec. 5. According to Thomson Reuters, the unemployment rate is expected to rise to 6.7 percent in November, with companies expected to cut another 268,000 jobs.
The Conference Board results - derived from responses received through Nov. 18 of a representative sample of 5,000 U.S. households - showed that consumers' assessment of the labor market was more negative than a month ago.
Those saying jobs are "hard to get" rose to 37.2 percent from 36.6 percent in October, while those claiming jobs are "plentiful" decreased to 8.8 percent from 9 percent.
(Copyright 2008 by The Associated Press. All Rights Reserved.)