Spending Rises Just in Time For Holidays

Consumer optimism rebounded this month, bolstered by rising incomes and stock prices, just as U.S. retailers geared up for the holiday shopping season, Conference Board figures showed Tuesday.

The consumer confidence index climbed to 135.8 in November from 130.5 in October, the New York-based research group reported. The index is the highest since August, and the increase follows four months of declines.

“Everyone’s employed and everyone’s got money,” said Richard Yamarone, senior economist at Argus Research Corp. in New York. “This is going to be the fuel for holiday sales.”

Indeed, U.S. car and truck sales rose an estimated 7.2% this month as Detroit auto makers added discounts on 2000 models to counter gains by Asian and European rivals such as Toyota Motor Corp. and Volkswagen.

The gain, the average estimate of five auto analysts, would put the industry’s 1999 sales through November just a few thousand vehicles short of 15.6 million sold for all of 1998. General Motors Corp. and DaimlerChrysler release their November sales today, followed by Ford Motor Co. on Thursday.

The industry is on track this year to break the record of 16.03 million sales in 1986, buoyed by consumers’ rising incomes and the lowest jobless rate in 29 years. Still, GM, Ford and DaimlerChrysler’s Chrysler arm took the unusual step of discounting some of their recently introduced 2000 models to protect their market share from Toyota, VW and others.

The burst of consumer optimism showed up at the cash register this last month. U.S. retail sales at stores open at least a year for the week ended Nov. 27 rose 6% from the same week a year ago, according to the Bank of Tokyo-Mitsubishi weekly sales report.

That includes the two days after Thanksgiving, one of the busiest times for retailers. Best Buy Co., Gap Inc.’s Old Navy chain and Wal-Mart Stores Inc. are among the retailers that drew crowds of people seeking bargains.

Consumer expectations for the economy over the next six months also rose in November--to 109.6 from 101.5 during October. The reading is the highest since June, when the overall index peaked at 139 for the best figures since October 1968.

The Conference Board surveys about 5,000 households on attitudes toward economic conditions, employment prospects and spending plans. Spending accounts for two-thirds of the nation’s economy. Strength in consumer confidence suggests more fuel for the economic expansion, in its ninth year and on track to set a record in February.

At the same time, the share of consumers planning to buy houses, autos and major appliances declined in November.

Separately, the National Assn. of Purchasing Management-Chicago said its factory index fell to 56.8 in November from 58.8 in October. At the same time, the index of prices paid rose to 70.9 from 65.4 last month.

“From the Fed’s perspective, the drop in the index will likely come as a relief, but the range of the past six months remains intact and the rise in the price index is a reminder of relentless upward pressure on commodity prices,” said Christopher Low, chief economist at First Tennessee Capital Market in New York.

A broader picture of the manufacturing economy will emerge today when the association releases its national survey.

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Consumer Confidence

From a monthly survey of 5,000 U.S. households.

Index: 1985=100.

November:

135.8

Source: Conference Board