Consumer Confidence Up in November But Trouble Lurks

November 29, 2011 (Chris Moore)

Consumer confidence continued to improve in November but a lack of action on important issues before the President and Congress over the next month could have a negative impact on consumer expectations according to the latest Surveys of Consumers by Reuters/University of Michigan.

The two most important issues likely to influence consumer confidence are the extension of the payroll tax cut and unemployment benefits. Both programs are set to expire at the end of the year and failure to resolve these issues would most likely have an immediate negative impact on consumers.

Consumers continued to have a negative view of the Obama administration’s current policies with the majority of the consumers giving the administration an unfavorable rating, the fourth consecutive month consumers have done so.

The Federal Reserve couldn’t escape the wrath of consumers either, with the majority of the consumers surveyed expressing less confidence in the Fed. It was the second consecutive month in which a majority of the consumers expressed a pessimistic view of the Fed. Consumers who said they had lost confidence in the both the Fed and the administration were extraordinarily pessimistic about the outlook of the national economy.

For the 48th consecutive month, more consumers reported that their finances had worsened rather than improved with income declines mentioned more frequently than gains as the primary reason.

Consumers continued to express their belief that their prospects will worsen in the coming year with half of all families expecting their living standards to decline during the next year with only 22 percent expecting their finances to improve.

All three indices that make up the Index of Leading Economic Indicators posted gains in November, but were still down from last year’s levels.

The Consumer Sentiment Index climbed 5.3 percent to 64.1 in November, up from 60.9 in October but down 10.5 percent from 71.6 in November of last year.

The Consumer Expectations Index increased to a level of 55.4 in November, up 6.9 percent from a level of 51.8 in October and down 14.5 percent from a level of 64.8 in November 2010.

The Current Conditions Index climbed 3.3 percent to 77.6 in November, up from 75.1 in October but down 5.5 percent from 82.1 in November of last year.

Richard Curtin, Surveys of Consumers chief economist said, “What will translate a political riff into an economic calamity for many families is if the payroll tax cut and unemployment benefits that are scheduled to expire at the end of December are not extended. Consumer confidence is now quite vulnerable to set-backs due to any number of adverse domestic and international economic developments. Doing nothing is not an option for Congress, the President, or the Federal Reserve since the lack of action will significantly raise the likelihood of a renewed recessionary downturn, which is already uncomfortably high.”

Tags: Surveys of Consumers, Reuters/University of Michigan, consumers, economic slowdown, finances, recession, financial expectations

Source:
Reuters/University of Michigan