A recent survey showed that Americans’ perceptions of the outlook for the economy and for employment improved in early November. Consumer sentiment also rose to its highest level in more than five years, marking four straight months of consumer mood improvement.
Wholesale inventories rose in September by the most in nine months as wholesalers sharply boosted stocks of farm goods and oil, a positive sign for economic growth. The Thomson Reuters/University of Michigan preliminary reading on the overall index on consumer sentiment rose to 84.9 from 82.6 in October, topping economists’ expectations for 83.
Consumer sentiment was the highest level since July 2007 and the measure of consumer expectations also hit a more than five-year high, rising to 80.8 from 79.0. Most interviews for the survey were done before the presidential election.
The positive feelings help in part to explain how the recent election went down, though the so-called “fiscal cliff” of impending tax rises and government spending cuts could be a shock to consumers if it is not quickly avoided. “It shows that the U.S. economy is on a decent footing heading into the so-called fiscal cliff,” said Joe Manimbo, market analyst at Western Union Business Solutions. “There’s a lot at stake, and there’s a lot momentum that could be lost if lawmakers don’t get their act together.”
The automatic spending cuts and significant tax increases set to come into effect in January could take an estimated $600 billion out of the economy and push it into recession, according to the non-partisan Congressional Budget Office; many believe that the lame duck congress will attempt to punt on most of the larger parts of the legislation.
“Unless the Congressional Grinch steals Christmas, prospects for the holiday shopping season have improved markedly,” said Survey director Richard Curtin.
Total wholesale inventories gained 1.1 percent to $494.2 billion, beating even the highest estimate in a Reuters poll of analysts. Inventories are a key element in the government’s measure of changes in GDP and can highlight underlying strength in U.S. growth.
Banking group Barclays raised its estimate for third quarter gross domestic product growth to 3.2 percent from 2.8 percent following the report. The first reading of growth for the third quarter showed the economy expanded at a 2.0 percent rate, though other recent economic reports, including data on trade and factory orders, have already suggested a faster pace of growth than first estimated.