Consumer confidence fell for the fifth consecutive month in November. The Conference Board Consumer Confidence Index was 82.2, dropping 3.1 points from the revised 85.3 in October. Economist's forecasted index for November was 86.5. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.
The Present Conditions Index, which is a factor in the total composite index, fell 13.7 points in November, following an 18-point drop in October. This index is a measure of how consumers perceive the current state of the economy. Since August 2001, the Present Conditions Index has dropped more than 50 points. On a positive note, the Expectations Index, a measure of future economic activity, increased 3.9 points in November to 74.6.
The updated November University of Michigan's Consumer Sentiment Index, a comparable index, experienced an increase in the composite score to 83.9 from 82.7 last month. The component indices increased slightly in November as well. The Present Conditions Index was 95.3 up from 94.0 in October, and Expectations increased just over a point to 76.6.
The interesting aspect of each consumer confidence survey in November is the Expectations Index. While the University of Michigan's Consumer Sentiment Index has seen improvement in previous months, the Conference Board November Expectations Index showed its first improvement since August. Increases in Expectations indices suggest that although the economy is struggling now, consumers anticipate improvement in the future.
Consumer spending accounts for two-thirds of the economy, so these indices are watched closely. Analysts predict consumer spending for the holiday season to be sluggish and reserved as the economy remains uncertain. Additionally, this week, the National Bureau of Economic Research officially declared the U.S. to be in recession. However, the recession is predicted to be relatively brief.
Taken together, current information points to continued economic struggle through the winter, and a likely strengthening through next summer. In an effort to boost the economy, the Federal Reserve is expected to cut interest rates again in December.
Sources:
www.cnnfn.com, 11/27/01
www.conference-board.com, 11/27/01
www.economy.com, 11/27/01
