Consumer confidence soars as gas prices drop
Report gives lift to holiday outlook; challenges remain
NEW YORK -- The outlook for the holiday shopping season brightened yesterday 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 will be shopping enthusiastically by the end of the holidays despite this past weekend's mixed start to the season. Separate reports yesterday of record home sales and a jump in durable goods orders provided more signs of an improving economy 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 it was also 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.
Meanwhile, the Commerce Department said sales of new single-family homes shot up by 13 percent last month, the biggest one-month gain in more than 12 years. The department also reported a 3.4 percent increase in orders for big-ticket manufactured goods in October.
The sharp rebound in confidence helped lift the Dow Jones industrial average almost 70 points early in the session, but the market ended lower, with the Dow falling 2.56, or 0.02 percent, to close at 10,888.16, as investors worried that a strengthening economy would lead to the tightening of interest rates.
The good news doesn't necessarily mean the economy is expected to remain robust.
Luxury home builder Toll Brothers Inc. recently cut its sales forecast for fiscal 2006, citing in part weaker demand in several of its markets.
And 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.