WASHINGTON – U.S. consumers’ confidence in the economy fell in November to the lowest level in seven months, dragged down by greater concerns about hiring and pay in the coming months.
The Conference Board said Tuesday that its index of consumer confidence dropped to 70.4 from 72.4 in October. The October reading was higher than initially reported, but still well below the 80.2 reading in September.
November’s drop comes after the 16-day partial government shutdown caused confidence to plunge in October. The declines in both months were driven by falling expectations for hiring and the economy over the next six months.
Some economists also attributed the weakening confidence to Americans’ frustrations and worries about the implementation of the Obama administration’s health care reform.
“Disgust with politicians and government policy is what’s holding back expectations,” said Ted Wieseman, an economist at Morgan Stanley.
Less optimism among Americans could slow the holiday shopping season and weigh on economic growth. Consumer spending drives 70 per cent of economic activity.
But spending patterns don’t always closely follow measures of confidence. Americans sometimes shop more even when they say they are less optimistic.
That’s what happened last month. Despite a sharp fall in confidence in October, consumers spent 0.4 per cent more at retail stores and restaurants than in September.
Strong auto sales accounted for about half the gain. Restaurants also reported a healthy increase in spending. Americans also spent more on furniture, electronics and clothing. There were some signs of caution: sales at grocery stores were flat and department stores reported only slightly higher sales.
Wieseman said the report included some good news: Consumers’ assessment of the current job market improved a bit, which bodes well for November’s jobs report, to be released next week.
Steady hiring could boost confidence in the coming months, Wieseman added, particularly if the government’s health care website is fixed and as memories of the shutdown fade.
Employers added an average of 202,000 jobs from August through October, up from just 146,000 in the previous three months.
And lower gas prices have put more money in consumers’ pockets. Prices fell for nine straight weeks to the lowest level in nearly two years before moving up slightly in the past two week. The average price for a gallon of gas nationwide Monday was $3.28.
Economic growth is expected to slow in the current October-December quarter, partly because consumer spending growth is likely to be moderate. The economy expanded at a 2.8 per cent annual rate in the July-September quarter, but most economists expect it will slow to about a 2 per cent rate or lower in the fourth quarter.