Consumer Sentiment Rises to Highest Level Since June
Economists surveyed by Bloomberg had predicted that the sentiment index would rise to 69.5 for the final November tally, up from November's 69.3 preliminary reading, and above October's 67.7 reading. The index was at 68.2 in September, 68.9 in August, and 67.8 in July. At the start of the recent recession in December 2007, the index stood at 88.9.
Richard Curtin, director of surveys for the Thomson Reuters/University of Michigan Surveys of Consumers, said Americans are sensing a modest improvement in the job market, and it's showing up in the data.
"The economic news heard by consumers grew significantly more favorable in November. Net references to job gains improved by 17 percentage points in November, rising to its highest level since June," Curtin said in a statement, Reuters reported Wednesday.
Optimism Inches Up
The consumer expectations component rose to 64.8 in November from 61.9 in October, and 60.9 in September, while the current conditions component jumped to 82.1 in November from 76.6 in October, and 79.6 in September.
Economists, business executives, and policymakers monitor consumer sentiment because, historically, consumer attitudes have been correlated with consumer decisions to spend. In general, rising consumer sentiment leads to increases in consumer spending, or the maintenance of a level of spending, while falling consumer sentiment foretells the reverse. And historically, consumer spending has accounted for 65% to 70% of U.S. GDP.
November's rise in consumer sentiment closes out a generally positive month of news for the U.S. economy.
U.S. GDP growth for the third quarter was revised higher, to a 2.5% growth rate from the initially-estimated 2% growth rate. Jobless claims extended their downtrend and are nearing the pivotal 400,000 level, and U.S. exports, aided by a slightly weaker dollar, rose. Accordingly, consumer sentiment moved higher, but investors should keep the month's gain in perspective. The sentiment index remains at a low level, and Americans will need to see strong commercial activity with adequate job growth of at least 125,000 new jobs per month -- for several quarters running -- before consumer sentiment returns to its normal levels near 80.