Gauge of Economic Sentiment Gets a Lift

The outlook for the holiday shopping season brightened Tuesday with news that consumer confidence soared in November in response to a drop in gasoline prices and a pickup in the job market.

The surge in the Conference Board’s consumer confidence index raised hopes that Americans would be shopping enthusiastically by the end of the holidays despite last weekend’s mixed start to the season.

Separate reports Tuesday of record home sales and a jump in durable goods orders provided more signs of an improving economy, and that’s likely to boost shoppers’ spirits.

“It looks like consumers will be in a more giving mood,” said Gary Thayer, chief economist at A.G. Edwards & Sons in St. Louis. But he added, “I don’t think they will spend with abandon. There are still some tight financial problems for many people. We probably will see active shopping for bargains.”

The Conference Board said its consumer confidence index rose to 98.9 this month, the highest level since August, when the reading was 105.5. The November figure surpassed analysts’ forecasts for a reading of 90 and was up from 85.2 in October. The results reversed a two-month decline.

“A decline of more than 40 cents in gasoline prices this month and the improving job outlook have combined to help restore consumers’ confidence,” Lynn Franco, director of the Conference Board Consumer Research Center, said in a statement.

“While the index remains below its pre-Katrina levels, the shock of the hurricanes and subsequent leap in gas prices has begun wearing off just in time for the holiday season,” Franco said.

Meanwhile, the Commerce Department said sales of new single-family homes shot up 13% last month, the biggest one-month gain in more than 12 years. The department also reported a 3.4% increase in orders for big-ticket manufactured goods in October.

But the batch of good news doesn’t necessarily mean the economy is expected to remain robust. Merchants face big challenges for the holiday season. Although gasoline prices have fallen in recent weeks, they are still higher than a year ago, and home heating costs are expected to force consumers to budget carefully.

The official start to the holiday shopping season was mixed. Discounters and electronic retailers fared the best, but some apparel stores were disappointed with their weekend results. A clearer picture should come Thursday, when major retailers report their November sales figures.

The rebound in consumer sentiment provides some encouragement for the rest of the holiday season. One component of the Conference Board report, which examines consumers’ views of the current economic situation, rose to 114 from 107.8. The expectations index, which measures consumers’ outlook over the next six months, surged to 88.8 from 70.1 last month.