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Consumer Confidence Up Two Months in a Row

While the index at 72.2 is at its highest level this year, it is still below the level of 90 that is considered an indicator of a healthy economy.

Consumer confidence in October was bolstered by an improving job market, but while the index at 72.2 is nearly at its highest level in five years, it is still below a reading of 90 that is considered representative of a healthy economy.

The two components of the Consumer Confidence Index also rose this month. The Present Situation Index increased to 56.2 from 48.7, while the Expectations Index is up to 82.9 from 81.5.

Lynn Franco, director of economic indicators at The Conference Board, said, “Consumers were considerably more positive in their assessment of current conditions, with improvements in the job market as the major driver. Consumers were modestly more upbeat about their financial situation and the short-term economic outlook, and appear to be in better spirits approaching the holiday season.”

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The Consumer Confidence Index, up two months in a row, is at its highest level this year, and way above the all-time low of 25.3 in February 2009. Still, the last time it reached 90 was in December 2007.

According to the Conference Board, the current assessment of consumers who said jobs are “plentiful” increased to 10.3 percent from 8.1 percent. Consumers’ outlook six months out was optimistic, with those anticipating improvement in business conditions over the next six months up to 21.4 percent from 17.9 percent.

The cutoff date for the survey results was Oct. 18, and the impact of Hurricane Sandy is not reflected in the current survey.

IHS Global Insight economist Chris G. Christopher, Jr. said, “Unlike many businesses, most Americans are not worried about the fiscal cliff. And most households are not worried about the European debt crisis and the economic slowdown in the emerging market economies.”

IHS is forecasting holiday sales to rise 4.5 percent above last year and believes that the boost in consumer mood will help holiday sales.

In a telephone interview, the economist expects that the impact from Hurricane Sandy on holiday sales will be short-term. By that he means that while spending over the next couple of weeks may be mostly for building materials to rebuild, as well as automobile repairs or replacement, things should return to normal by the “back end of November.”

Even if gas prices should increase as supply decreases due to a rise in demand to fill the tank at the pump or to fuel portable generators — generally considered a factor that hurts consumers’ discretionary spending — the economist said that should be just a short-term blip that might be reflected in November’s consumer confidence report but won’t be a concern once things return to normal.

As for apparel sales, the economist said, “For apparel, don’t expect consumers to head to the high-end stores, but family clothing should do well. One pattern we’ve seen outside of the hurricane is the bifurcation of the American consumer. They are going to the lower end and the upper end, your luxury and discount stores, while the ones in the middle tier are struggling.”

He’s expecting e-commerce to be strong for holiday. “One in every $20 is spent online. That’s a pretty big number. The percentage is getting higher and higher. The strong boost in seasonal hiring is [seen in the] couriers because those services are related to e-commerce retail sales.”

According to a Deloitte spokeswoman, the consulting firm also isn’t anticipating a major impact from Hurricane Sandy on the holiday season as a whole, and is keeping its forecast at between a 3.5 percent to 4 percent gain in holiday sales.

She also noted that in Deloitte’s annual holiday survey, 24 percent of respondents said they plan to delay their shopping until the presidential election has been decided. Half said the election won’t change their spending plans, while 23 percent said they were undecided on whether the election will affect how much they spend.