Americans’ confidence about the strength of the economy rose by a small amount this month, according to a University report. Despite the increase, some of the nation’s largest retail chains reported a disappointing start to the holiday shopping season over the Thanksgiving weekend.
The Consumer Confidence Index, a closely-watched indicator of the economy’s health released by the University each month, increased to 92.8 this month, up from 91.7 in October. Despite the small rise, the index remains far below the 103.8 posted at the start of the year and is also lower than the 93.7 recorded last November.
Business Prof. Nejat Seyhun said given the recent high prices of oil and an 0.6 percent increase in inflation last month, even a small jump in the index indicates that consumers are confident in the future performance of the economy.
“Consumers have been keeping the economy afloat for the last four years and it looks like the same at this stage,” Seyhun said in an e-mail.
Richard Curtin, director of the University’s Surveys of Consumers, which compiles the index, said in a news release that people are confident enough in the future performance of the economy that they will both spend and save more money next year. Surveys of Consumers predicts that next year, inflation-adjusted consumption will increase by 3.25 percent and saving will increase 1.25 percent.
Holiday sales at Wal-Mart over the Thanksgiving weekend — traditionally the start of the holiday shopping season — were lower than expected, and sales for November, while higher than last year, were still well short of the 2 to 4 percent increase the company predicted last week, according to a company news release.
Total sales during the holiday season, excluding money spent on cars and in restaurants, are expected to increase by less than they did last year, according to the National Retail Federation.
Seyhun said he does not expect strong holiday sales at stores like Wal-Mart and K-Mart — which recently merged with Sears, Roebuck and Co — since the people who frequently shop at these retail giants have been hit hard by increases in gas and energy prices.
“The annual income of a typical Wal-Mart shopper is about $35,000 per year, (versus) $50,000 for a Target shopper,” he said.
Although fewer holiday shoppers than expected turned out, the number of people traveling by plane and car was expected to surpass pre-Sept. 11 levels for the first time, according to the American Automobile Association, which projected the number of travelers would increase from 36.1 to 37.2 million.
Jim Rink, AAA spokesman for Michigan, said most of the state residents surveyed by the organization said the modest improvement in the economy was a factor in their decision to travel.
Seyhun said the consumer confidence increase is due in part to the election earlier this month. “The fact that President Bush won re-election and people can forecast his policies better than a new Kerry Administration certainly removes an important piece of uncertainty from consumer’s lives,” he said.
Curtin said the slight jump in the index indicates consumers expect the economy to grow more slowly next year.
“Consumers are not yet convinced that the economy will produce significant job gains over a sustained period of time,” he said.