Economy gets lift from consumers, businesses
WASHINGTON — American consumers are growing more confident about the job market, companies are ordering more equipment and home prices are rising in most major cities.
The latest batch of government data suggests that the economy is improving just as the holiday shopping season begins. The only threat is a package of huge spending cuts and tax increases that will kick in unless Congress strikes a budget deal by year's end.
Rising home values, more hiring and lower gas prices pushed consumer confidence in November to the highest level in nearly five years. And steady consumer spending appears to have encouraged businesses to invest more in October after pulling back over the summer.
Those trends could boost economic growth slightly in the final three months of the year. But the real payoff could come early next year — if the automatic tax increases and spending cuts known as the “fiscal cliff” can be averted. Businesses that have postponed expansion plans could move forward with projects. That could lead to more hiring.
“Right now, households don't seem to be letting the fiscal threat control their urge to spend,” said Joel Naroff, president of Naroff Economic Advisors.
Reports Tuesday showed:
• The Conference Board's consumer confidence index rose to 73.7 in November from 73.1 in October. Both are the best readings since February 2008. The index is still below 90, the level that is consistent with a healthy economy. It last reached that point in December 2007, the first month of the Great Recession. But the index has increased from the all-time low of 25.3 touched in February 2009.
• The Standard & Poor's/Case-Shiller 20-city index of home prices rose 3 percent in September compared to the same month last year. Prices also gained 3.6 percent in the July-September quarter compared to the same quarter in 2011. Prices increased in 18 of 20 cities.
over the 12-month period.
• Companies ordered more industrial machinery and other large equipment in October. Orders for core capital goods, considered a proxy for business investment, rose 1.7 percent in October, the Commerce Department said. That's the largest increase since May and it follows sharp declines over the summer.
One reason Americans are more optimistic is because they see the job market improving, the Conference Board survey showed. Employers added 171,000 jobs in October, and more jobs were created in August and September than first thought.
The percentage of Americans who say jobs are “plentiful” rose to 11.2 percent from 10.4 percent in the previous month, according to the survey. That's the highest level in four years. Some economists say that's a good sign for hiring.
Falling gas prices, which leave consumers more money to spend, are providing another boost. Gas prices have dropped from an average of about $4 a gallon in September to $3.42 on Tuesday, according to AAA.
There are already signs that consumer optimism is leading to more spending. A record number of Americans visited stores and shopping websites over the four-day Thanksgiving weekend, according to a survey by the National Retail Federation.
Shoppers spent an average of $423 from Thursday through Sunday, up from $398 last year.
And online sales jumped 30.3 percent on Cyber Monday, making it the biggest online shopping day ever, according a report from IBM Benchmark, which tracks online sales.
The Conference Board surveyed approximately 2,500 households in the first two weeks of the month. Those surveyed were asked how they felt about the economy and job market now, as well as where they see both going in six months. They were also asked whether they planned to make a major purchase or take a vacation in the next six months.
More Americans said they plan to buy a home, an appliance or take a vacation, the survey found. About 6.9 percent said they planned to buy a home in the next six months, the highest on record. But the percentage expecting to buy a car fell.
The rise in confidence suggests that households aren't yet concerned about the fiscal cliff.
“Hopefully, their optimism is warranted,” said Joseph LaVorgna, an economist at Deutsche Bank. But if the cliff isn't avoided, they “could be in for a rude awakening.”
The higher tax rates that would result would leave consumers with less money to spend and could prompt businesses to cut back on hiring and investing.
But a resolution of the cliff, as most economists expect, would likely raise both business and consumer confidence even further.
Paul Ashworth, an economist at Capital Economics, said the economy would benefit greatly if a deal is reached this year or in early 2013.
“We would expect to see something of a rebound in business investment, as firms give the green light to projects put on hold in the second half of this year,” Ashworth said.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Rare surgery helps woman beat paralysis
- Firefighters extinguish fire that damages 6 cabs at Yellow Cab Co.
- Police identify driver in North Side crash that killed pregnant woman
- Steelers’ backups Archer, Harris ready to run
- Steelers notebook: Roethlisberger says Saints game is ‘must win’
- Comeau’s hat trick leads Penguins; Crosby reaches 800 career points
- Boyce Park to open ski season Friday
- Starkey: Rutherford will add when timing’s right
- Washington Township woman savors family’s turkey farm tradition
- Turkey Trot runners turn out to burn calories despite chilly Pittsburgh temps
- Reading’s ‘ugly’ Christmas tree getting single red bulb