Consumers smile and their wallets re-open

Don Hogsett, November 3, 2003

In a strong dose of good news that could signal a recovery in retail sales in time for the all-important holiday season, consumer confidence staged a major rebound during October, rising by 5.3 percent, and reversing two straight months of declines, The Conference Board reported.

The bellwether signal of consumer sentiment, widely viewed as a precursor of future consumer spending, rose to a current reading of 81.1, up from 77.0 in September, helped by an improving job market. The October gain largely offset September's 5.8 percent drop.

The way consumers look at current economic conditions improved during October as consumers saw the job market improving. "After declining for five consecutive months, the Present Situation Index reversed course in October," said Lynn Franco, director of The Conference Board's Consumer Research Center. "A more favorable job market was a major factor in the turnaround."

And consumers are feeling better looking further out, said Franco. "The belief that this trend will continue has boosted expectations. With the holiday season around the corner, this improvement in consumers' spirits is a good omen for upcoming retail sales."

Consumers' appraisal of present-day conditions ended a five-month slide in October, rising by 11.9 percent to a reading of 66.8 from 59.7 the prior month.

Driving the improvement was a growing sentiment that the labor market is at last improving. The number of consumers who said they think jobs are "plentiful" rose to 11.8 percent from 9.9 percent in September. And the number who thinks jobs are "hard to get" correspondingly eased off, to 33.8 percent from 35.1 percent.

Consumer confidence by region

New England +0.3
Middle Atlantic +5.5
East North Central +7.3
West North Central +10.0
South Atlantic +15.4
East South Central +38.9
West South Central -4.9
Mountain +9.1
Pacific +8.5

Consumer Buying Plans — October
plans to purchase over the next six months

Source: The Conference Board
Homes +0.0%
Carpets +2.1
Major appliances +1.1
Cars +24.1
Vacation +1.2

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