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Thu, Dec 01, 2005 - Page 12 News List

US consumer confidence soars

ECONOMIC INDICATORS All the signs show that consumers will soon be hitting the shops again after a drop in gas prices and as employment prospects improve


The outlook for the holiday shopping season brightened on Tuesday with news that US consumer confidence soared last month 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 US citizens will be shopping enthusiastically by the end of the holidays despite this past weekend's mixed start to the season. Separate reports on Tuesday 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. 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 last month, the highest level since August, when the reading was 105.5.

The figure for last month 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 US$0.40 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.

"While the index remains below its pre-Katrina levels, the shock of the hurricanes and subsequent leap in gas prices has begun wearing off just in time for the holiday season," Franco said.

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 stock 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.

But the batch of 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 next year, citing in part weaker demand in several of its markets.

And merchants do 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.

The official start to the season was mixed, as discounters and electronic retailers fared the best but some apparel stores were disappointed with their weekend results. A clearer picture should come today, when major retailers report their sales figures for last month.

The International Council of Shopping Centers said on Tuesday that sales at stores open at least a year, known as same-store sales, rose 5.1 percent for the week ended Saturday, compared to the same period last year.

Longer shopping hours on Friday helped retailers bring in more sales, said Michael Niemira, chief economist at the trade group.

The rebound in consumer sentiment does provide some encouragement for the rest of the holiday season. One component of the Conference Board report, which examines consumers' views of the current economic situation, rose to 114.0 from 107.8.

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