WASHINGTON -- Consumer confidence surged in November, buoyed by gains in nearly every region of the country, the Conference Board reported yesterday.
The private research group's consumer confidence index advanced 10.7 points in November to a reading of 71.2, the highest level since January. "An improvement of this magnitude has occurred only rarely in the 25-year history of this survey," the New York-based group said. Despite the big gain, the confidence index is still at an historically low level, the Conference Board said. Economists said, however, that the sizable increase put the index more in line with other recent indicators showing that consumers seem to feel better about the economy because they are spending more on big ticket items, such as homes and cars.
"This validates from a sentiment point of view what consumers have already started to do in terms of their purchases," said Jeff Thredgold, chief economist of KeyCorp.
Thredgold and other analysts predicted that the confidence index could move slightly higher in the coming months as the labor market and household incomes continue to improve at a slow but steady pace. "Consumers have turned a bit more bullish on the economy in recent months." said Veronika White, an economist with First Fidelity Bancorp.
The index may plateau around the 75 mark by the spring of next year, then drift lower from there as an anticipated slowdown in growth begins, Thredgold said.
Consumer confidence gained in all areas of the country in November, except in the West South Central region where consumer sentiment slipped only slightly, the Conference Board said.
For a change, the coasts received some good news. "Particularly large gains were recorded in those areas which have experienced more economic difficulties than elsewhere," the group said. "Confidence was up sharply in the Pacific region and in New England."
Compiled from a survey of 5,000 households, the index is based on two components: one measuring sentiments about current conditions and one measuring future expectations.
Both components posted gains in November, with the outlook of consumers for the future gaining more ground than their view of today, data from the board showed. "On the questions of employment and their families' income prospects, the readings are a lot more positive than a month ago," the group said.
The index has not shown much predictive power about future consumer spending in the last two years, analysts said. Rather, they say the index is better used as a coincident indicator, confirming other data.
Daryl Delano, senior economist with Cahners Economics, Inc., said the large gain in the November index was particularly encouraging because it helped show that other recent favorable reports, such as the 14-year high for existing home sales reported Monday, are not a fluke. "This reinforces other good news," he said.
The confidence index has gained at least slightly in four of the last five months, data showed. And in general, economic indicators have turned upward in recent months. Consequently, growth forecasts for the fourth quarter have improved some.
Delano said Cahners currently forecasts gross domestic product growth of roughly 3.3% in the fourth quarter, but the recent string of solid reports will probably push that estimate closer to 4.0%.
In recent months, Thredgold said he has bumped up his forecast for fourth quarter growth from around 3.0% to the 3.5%-4.0% range. "And it's not out of the realm of possibilities that we'll see growth above 4.5%," he noted.
First Fidelity's White predicted growth of around 4.0% in the fourth quarter and growth closer to 3.0% in the first quarter of next year. "The economy is on a moderate growth track," she said.