Consumer Confidence Climbs to a 5-Year High

An increasingly upbeat view of the economy and the jobs market drove consumer sentiment to its highest level in more than five years in early November, while a jump in wholesale inventories suggested the economy grew more than initially estimated last quarter.

It was the fourth month that Americans adopted a rosier economic outlook, even as financial markets showed increasing anxiety on fear that the spending cuts and tax increases set to take effect in the new year could push the country back into recession.

Separate data from the government on Friday showed wholesale inventories rose in September by the most in nine months, prompting economists to raise their forecasts for third-quarter growth. Inventories are a key element of the government’s measure of economic growth and can highlight underlying strength or weakness.

The index of consumer sentiment from Thomson Reuters and the University of Michigan rose to 84.9 in November from 82.6, topping economists’ expectations for a reading of 83.

It was the highest level since July 2007. The measure of consumer expectations also hit the highest level in more than five years, rising to 80.8 from 79.0. Most interviews for the survey were done before Tuesday’s presidential election.

“It shows that the U.S. economy is on a decent footing heading into the so-called fiscal cliff,” said Joe Manimbo, a market analyst at Western Union Business Solutions in Washington. “There’s a lot at stake, and there’s a lot of momentum that could be lost if lawmakers don’t get their act together.”

The survey director, Richard Curtin, said the re-election of President Obama should not have an impact on overall expectations, but if Washington does not act quickly to avoid the $600 billion in automatic spending cuts and tax increases, consumers could face a shock.

But the chances of a comprehensive legislative solution to the tax increases and spending cuts before Jan. 1 are considered slight, and members of Congress have been looking for a temporary fix to buy time.

While a negative conclusion to the discussions poses a risk to confidence and spending, “uncertainty over the ultimate outcome doesn’t appear to have troubled consumers unduly thus far,” a Barclays economist, Peter A. Newland, wrote.

The Commerce Department reported that total wholesale inventories gained 1.1 percent to $494.2 billion, beating even the highest estimate in a Reuters poll of analysts.

JPMorgan and Barclays raised their estimates for third-quarter gross domestic product growth to 3.2 percent from 2.8 percent after the release of the report.

Article source: http://www.nytimes.com/2012/11/10/business/economy/consumer-confidence-climbs-to-a-5-year-high.html?partner=rss&emc=rss