Consumers poised to spend for holidays But 6-month outlook is not as confident

November 27, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK -- Americans remain confident about the current health of the U.S. economy, just in time for the year's busiest shopping season, which opens Friday, the Conference Board said yesterday.

Consumer confidence is tempered, however, by a less optimistic outlook for the next six months, the New York-based group's survey shows.

The Conference Board reported its monthly confidence index was unchanged at 107.3 in November from the revised figure for October. The related index tracking consumer expectations for the next half-year fell to 91.4 from October's 95.7.

Meantime, the Federal Reserve Bank of Philadelphia released a quarterly forecast yesterday showing that economists anticipate a 2.1 percent growth rate for the last three months of 1996 and a similar pace for of 1997.

Together, those reports seem to coincide with the expectations of most economists that the U.S. economy is perking along at a pace slow enough not to ignite inflation and still fast enough to create jobs.

"This fits rather neatly into the whole spectrum of recent data telling us the economy is doing quite well -- not too hot, not too cold," said David Resler, chief economist at Nomura International in New York.

Investors, economists and retailers watch such reports to help them gauge how much Americans are willing to spend during the holidays.

Upbeat consumers, who feel secure about their jobs and financial prospects, tend to spend more on Christmas gifts and other holiday items. That's important because the holiday season typically accounts for about half of retailers' sales and profits, and consumer spending accounts for two-thirds of overall economic activity.

Yesterday's report still bodes well for Christmas sales, analysts said. That's because the survey shows that while consumers aren't as upbeat about their financial future as they were during the summer and early fall, the index that tracks their assessment of present conditions hit a seven-year high of 131 this month.

"We feel very optimistic we are going to have a good holiday," said Sears, Roebuck & Co. Chief Financial Officer Alan Lacy.

In this month's consumer confidence report -- which provides the first hint on how well the overall U.S. economy fared in November -- the number of respondents who expect their incomes to rise over the next six months was barely changed from October.

The index measuring consumers' plans to buy a home over the next six months rose; buying intentions for major home appliances dipped. Fewer Americans plan to take a vacation over the next six months, the report said.

The confidence index has hovered near record levels in recent months, hitting a peak of 112 in August before declining.

Pub Date: 11/27/96

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