labels: Economy - general
US consumer confidence down, Black Friday shopping up: What's really happening? news
29 November 2007

Is it that US consumers tell surveys one thing, and then actually go and do quite another? The Conference Board said on 27 November that its Consumer Confidence Index sank to 87.3 in November from 95.2 in October. Economists had expected a reading of 91.5 for November.

This indicates that rising gasoline prices, housing market woes and credit-market worries may be taking more of a toll than we thought. The report comes hot on the heels of data showing robust retail sales for the Black Friday holiday shopping weekend, and probably for the month as a whole.

November consumer confidence dropped to 87.3 (median 92.0) from a revised 95.2 (previously 95.6). This is its lowest level since October 2005, when consumer confidence was sharply jolted by Hurricane Katrina, and the March 2003 start of the war in Iraq.

But, as happened in all these events, consumer fears do not seem to affect actual spending decisions. The mounting consumer angst this year hasn''''t, till now, affected movements in the savings rate and spending overall.

The confidence drop in the November report was led by a particularly hefty decline in the expectations index to 68.7 from 80.0. The current conditions series moderated only to 115.4 from 118.0. This mix is what might be expected if the drop were led by negative news rather than shifting personal economic circumstances.

But the Washington-based National Retail Federation has predicted that November and December retail sales would be up 4 per cent over 2006. That would be the slowest growth since 2002.

A pullback in consumer activity has already popped up in some sectors. On 26 November, Newell Rubbermaid cut its guidance because of weaker demand for office supplies. The company makes products like markers, rolodexes and highlighters.

The increasing unease of consumers is most apparent in their outlook. The number of consumers that expect business conditions to get worse in the next six months increased to 16.7 per cent in November from 13.9 per cent in October.

Consumer confidence is on the wane during the key shopping period for 2007. November and December account for a disproportionate amount of sales and profits for retailers. A nervous consumer could throttle sales, which would have a global effect since the United States imports a sizable amount of store-bought goods. A single American shopping sneeze could give much of the exporting world a bad cold.


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US consumer confidence down, Black Friday shopping up: What's really happening?