U.S. Consumer Confidence Climbs Higher in November



Author: RBC Financial Group Economics Department
Location: Toronto
Date: 2012-11-28

  • US consumer confidence climbed by 0.6 points to 73.7 in November 2012 from an upwardly revised 73.1 reading in October (previously reported as 72.2). Market expectations were for a more modest 73.0 reading.
  • The current employment differential improved to -27.6 from -28.4 in October with more consumers reporting jobs as “plentiful”.
  • Continued improvement in consumer sentiment in November suggests that household confidence, at least to this point, has not been as significantly affected by uncertainty surrounding ‘fiscal cliff’ negotiations as has appeared to be the case for business investment. While the fiscal cliff remains a significant risk to spending next year, we continue to expect that a rebound in consumer spending during the second half of November and in December following hurricane-related weakness in October will prevent a significant slowing in consumer spending in the fourth quarter of 2012.
  • In a separate release this morning, the seasonally-adjusted S&P/Case-Shiller 20-City Composite measure of US house prices posted its eighth straight monthly increase by rising 0.4% in September. The annual pace of increase in the unadjusted index picked up to 3.0% year over year from 2.0% in August.

The Conference Board’s measure of US consumer confidence rose to 73.7 in November 2012, which was above expectations for a 73.0 reading, from an upwardly revised 73.1 level in October. The strength in November reflected consumers being more optimistic about the short-term outlook. The “present situation” component moderated to 56.6 from 56.7; however, this still marked the second-highest reading since September 2008. The “expectations for six months hence” component climbed to 85.1 from 84.0 in October and 81.5 in September.

With respect to labour market conditions, those saying jobs were “plentiful” rose to 11.2% from 10.4% in October while those saying jobs were “hard to get” were unchanged at 38.8% from a downwardly revised reading in October that was previously reported as 39.4%. This resulted in the labour market differential (the difference between these two components) improving to -27.6 in November from -28.4 in October. This represents the best assessment of labour-market conditions, from the consumer’s point of view, since October 2008.

Continued improvement in consumer sentiment in November suggests that household confidence, at least to this point, has not been as significantly affected by uncertainty surrounding ‘fiscal cliff’ negotiations as has appeared to be the case for business investment. This is consistent with the view that the decline in retail sales, as well as a sharp drop in auto sales, in October had less to do with an underlying deterioration in the spending backdrop and more to do with disruptions related to Hurricane Sandy toward the end of the month. While the fiscal cliff remains a significant risk to spending next year, we continue to expect that a rebound in spending during the second half of November and in December will prevent a significant slowing in consumer spending in the fourth quarter of 2012.

In a separate release this morning, the seasonally-adjusted S&P/Case-Shiller 20-City Composite measure of US house prices rose 0.4% on a month-over-month basis in September, thereby matching market expectations. The increase in the measure in September marked the eighth straight month of rising prices. On a year-over-year basis, the unadjusted index rose by 3.0% in September, which was a faster annual pace of growth than the 2.0% gain in August. This marked the fourth consecutive month of annual price growth after the gauge move above year-ago levels for the first time since late 2010 in June (0.6%).

Information contained in this report has been prepared by the Economics Department of RBC Financial Group based on information obtained from sources considered to be reliable. While every effort has been made to ensure accuracy and completeness, RBC Financial Group makes no such representation or warranty, express or implied. This report is for information purposes only and does not constitute an offer to sell or a solicitation to buy securities.

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