Consumers More Upbeat About Economy, Jobs
NATIONAL REPORT -- Two leading indices of consumer confidence rose last month, but both surveys were conducted prior to Superstorm Sandy's destructive path through the Northeast, which economists predict will shave up to half a percentage point from economic growth in the fourth quarter.
The Conference Board's Consumer Confidence Index for October rose to its highest level in more than four years and increased for two months in a row. Currently, confidence is standing at an index of 72.2. The index of present conditions rose 7.5 points to reach 56.2, while the expectations index inched up 1.4 points to reach 82.9.
The labor index (percentage of respondents who think that jobs are plentiful minus the percentage who think jobs are hard to get) improved 3.5 points to reach minus 29.1 percent.
"Consumer optimism is on the rise as job prospects improve and the summer doldrums seem to be behind most Americans," said Chris G. Christopher, Jr., senior principal economist at IHS Global Insight. "The unemployment rate is below 8 percent, personal income showed a sizable gain, and the housing market seems to be looking brighter. In addition, pump prices have dropped considerably in October, offering further assistance to household budgets."
Meanwhile, the Reuters/University of Michigan Consumer Sentiment Index for October climbed 4.3 points to 82.6. The current conditions index rose 2.4 points, and the expectations index jumped 5.5 points.
Both short- and long-term inflation expectations fell due to falling pump prices.
IHS Global Insight is forecasting 2012 holiday retail sales to increase 4.5 percent compared to last year. Holiday sales are defined as not-seasonally adjusted total retail less autos, gasoline and restaurants for November and December.
In addition to the short-term impact of Superstorm Sandy, "many economists expect the storm to shave up to half a percentage point from growth in the fourth quarter," according to an article in The New York Times. "That is a big reduction, with growth estimated to reach an annual rate of 1 [percent] to 2 percent before the storm, and the economy facing other significant headwinds, including fiscal uncertainty in Washington."
Economic losses from Sandy are expected to be lower than those from Hurricane Katrina, but the long-term impact could be greater because the Northeast is more densely populated and "is responsible for about $3 trillion in output, or roughly 20 percent of the country's total gross domestic product," according to the Times report.