Economy Watch: Consumers More Confident in Early November

The University of Michigan's Consumer Sentiment Index climbed to its highest level since mid-2016, but this was before the results of the presidential election were known.
Source: University of Michigan Surveys of Consumers
Source: University of Michigan Surveys of Consumers

Consumers are feeling a little better about the U.S. economy, or at least they were before the election. The University of Michigan’s Consumer Sentiment Index in early November (91.6) reversed the small October decline to climb to its highest level since mid-2016, and in fact rise slightly above the 2016 average of 91.1.

The fact that consumers, on the whole, also expect a small increase in interest rates ahead had little impact on favorable buying attitudes, and according to the university, the data supports an outlook for a 2.5 percent increase in real consumer spending during 2017. However, the November data also comes with the proviso that it was collected before the result of the presidential election was known late Tuesday.

The question for retailers, then, is whether consumers will be optimistic enough to facilitate a strong uptick in spending for the holiday season, despite—or because—of recent electoral events. Official retail spending numbers for October will be reported on Tuesday, which ought to give some sense of the direction spending will take over the last two months of the year.

One prediction about consumer spending is fairly optimistic. Ebates, a subsidiary of the global Internet services company Rakuten, published its Holiday 2016 Survey recently. Among other findings, almost all Americans (90 percent) plan to do at least a little shopping on Thanksgiving weekend, with 73 percent shopping online and 42 percent shopping on the go via mobile devices.

Clothing and shoes will be the number-one items Americans will buy during Thanksgiving and Black Friday (64 percent), Ebates predicts. That’s followed by toys (61 percent), electronics (53 percent) and gaming consoles (31 percent).