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Consumer Sentiment Rises, Hits 5-Month High

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November 11, 2011 by   Leave a Comment

Americans became more hopeful about the economic outlook in November, pushing consumer sentiment to a five-month high, though they still have a gloomy view of personal finances, a survey released on Friday showed.

Reuters reported it was the third monthly gain in a row for the index, an encouraging sign for an economy where consumer spending accounts for 70% of activity. Even so, sentiment is still at historically low levels, with the index down more than 13 points from a peak in February.

The Thomson Reuters/University of Michigan’s preliminary reading on the overall index on consumer sentiment rose to 64.2 from 60.9 the month before, topping the median forecast of 61.5 among economists polled by Reuters.

The survey’s gauge of consumer expectations climbed to 56.2 from 51.8. While respondents were no more positive about the current state of the economy, they were less likely to expect it to worsen in the year ahead, the survey said.

Economists said the lackluster levels underscored the recent disparity between weak sentiment data and stronger spending reports, suggesting dismal consumer attitudes may not reflect their purchases.

“Despite the persistence of low consumer sentiment stemming from negative views of government economic policy, concerns about the European debt crisis, and high unemployment, recent data releases on consumer spending have otherwise been in line with our expectation of continued modest growth in real consumption,” Michael Gapen, economist at Barclays Capital in New York, wrote in a note.

Consumers remained gloomy about their own finances with more respondents reporting their finances had worsened than improved. Just one in five consumers expected improvement in the year ahead.

Worries the United States could be in for another recession pummeled confidence in recent months, as did political wrangling over raising the debt ceiling in the summer. Confidence in policy has yet to recover, with 58% of respondents rating economic policies unfavorably.

“Overall, it is still likely that real consumer expenditures will not be strong enough during the year ahead to enable the higher rates of economic growth needed to offset the negative grip of income and job stagnation on consumer spending,” survey director Richard Curtin said in a statement. “Although improved, a renewed downturn in the economy still has an uncomfortably high probability of occurring.”

Still, vehicle buying plans improved as 60% of consumers said buying conditions were favorable, helped by price discounts.

 

 

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