November Consumer Confidence: Bouncing Back

November 29, 2005 – The Conference Board’s Consumer Confidence Index rose by 13.7 index points to 98.9 in November, recovering about two-thirds of the plunge seen in the prior two months (Chart 1).

Chart 1. Consumer confidence. January 2000 through November 2005.

According to the Conference Board, lower gasoline prices and fading hurricane “shock” contributed to November’s upturn.

The expectations index (consumers’ forecasts for the next six months) shot up by 18.7 index points to 88.8 in November, leading November’s overall confidence gain (Chart 2). (Shifting expectations also played a key role in the prior two months’ weakness.)

Chart 2. Consumer confidence: present situation versus expectations. January 2000 through November 2005.

In addition, the present situation index rose by a hefty 6.2 index points to 114.0 in November.

By broad historical standards, November’s consumer confidence level qualifies as healthy, but not spectacularly strong (Chart 3).

Chart 3. Consumer confidence. February 1967 through November 2005.

Bottom line: No net progress, but these data should alleviate any fears of a confidence-led collapse in consumer spending.

Suzanne Rizzo