Consumer Sentiment Index Rises
U.S. consumers are heading into the holiday season in a much cheerier mood now that gasoline prices have fallen, data released Wednesday showed.
However, with interest rates climbing, other data pointed to a cooling housing market and a job market still feeling the effects of the powerful hurricanes that struck the Gulf Coast.
The University of Michigan’s final reading of consumer sentiment for November rose to 81.6 from 74.2 in late October, beating analysts’ forecasts of a rise to 80.5, according to people who saw the subscription-only report.
“It looks like the economy is stabilizing after the hurricane-related stresses and we’re heading into the holidays with an upturn in confidence that is encouraging and bodes well for the good consumer spending over the next month or so,” said Gary Thayer, chief economist at A.G. Edwards & Sons in St. Louis.
Consumer sentiment reports are often used to predict consumer spending. Analysts note, however, that even when consumers say they feel better about the economy, they often do not follow through by spending more.
Even though consumer sentiment indicators are below their pre-hurricane levels and the rate of home refinancings has declined, economists said they believed that spending would hold up well from Thanksgiving through Christmas.
A report from the Labor Department showed that the number of U.S. workers filing new claims for unemployment benefits rose by a larger-than-expected 30,000 last week to their highest level since mid-October.
There were 335,000 initial claims filed on a seasonally adjusted basis, above Wall Street forecasts of 315,000 and up from a revised 305,000 the previous week.
There were about 10,000 new non-seasonally adjusted claims last week related to hurricanes Katrina and Rita, a Labor Department analyst said, bringing the total number of claims linked to the Gulf Coast storms to 555,000.
“After adjusting for the storm effects, both initial and continuing claims appear to be near their pre-hurricane levels, indicating that labor markets remain strong despite the weak October payroll employment report,” said Steven Wood, economist at Insight Economics in Danville, Calif.
“For the survey week for the November payroll employment report, both new and continuing claims ... are below their October levels,” he said. “This suggests that the November payroll employment report should be much stronger than the October report.”
U.S. mortgage applications fell last week, as home refinancings hit a 16-month low and interest rates remained near their highest level in a year.
The Mortgage Bankers Assn. said its index of mortgage application activity for the week ended Nov. 18 fell to 635.4, marking a 3.4% drop from the week before.
Borrowing costs on 30-year mortgages, excluding fees, averaged 6.26% last week.
That average was 0.07 percentage point below the previous week’s 17-month high of 6.33%.
