2005

Confidence Slips, But Consumers Still Spending

November 2005

Fuel prices and hurricanes played a large part in a sharp decline in consumer confidence, but that dip in optimism hasn’t yet shown itself at retail registers across the country.

The Conference Board’s Consumer Confidence Index fell in October to 85, down from 87.5 in September, according to the Conference Board. The Present Situation Index declined to 108.2 from 110.4. The Expectations Index decreased to 69.5 from 72.3 last month.

"Much of the decline in confidence over the past two months can be attributed to the recent hurricanes, pump shock, and a weakening labor market," says Lynn Franco, director of The Conference Board Consumer Research Center.

Though short-term expectations are down, consumers' assessment of current conditions remains above readings a year ago, which may play a role in the strong sales reported in September.

Both the National Retail Federation and the U.S. Commerce Department reported stronger than expected retail sales for September, which analysts hope are strong indicators for the holiday season.

According to the NRF, retail industry sales for September rose 7.0 percent unadjusted over last year and increased 0.8 percent seasonally adjusted from August. The U.S. Commerce Department’s figures confirmed these findings, showing that total retail sales rose 0.2 percent seasonally adjusted from August and increased 7.1 percent unadjusted year-over-year.

"While many analysts expected consumers to hold back on spending as a result of higher gas prices, shoppers had other plans," NRF Chief Economist Rosalind Wells said in a statement. "This is a good sign for retailers as they head into the holiday season."