WASHINGTON -- Americans' confidence in the economy surged last month to the highest level in nearly five years, as many were encouraged by an improving job market.
Conference Board said Thursday that its consumer confidence index
increased in October to 72.2. That's up from 70.3 in September and the
highest reading since February 2008, two months into the Great
Recession. Investors cheered the news.
were more confident after seeing better job growth, the report noted.
Hiring in July and August was stronger than first thought, and employers
added a modest 114,000 jobs in September, the government reported last
The survey is watched closely because consumer spending
drives nearly 70% of economic activity. The reading is still below 90, a
level that indicates a healthy economy. It last reached that level in
December 2007. But the index is far above the all-time low of 25.3
touched in February 2009.
The gain in consumer confidence could be
an encouraging sign for President Barack Obama, who faces re-election
Tuesday at a time when the economy is the top issue for most voters.
reported noted that consumers are more optimistic about both the
economy and job market now and where it is headed in the next six
Consumers were "modestly more upbeat" about their finances
and the outlook for the economy, said Lynn Franco, a Conference Board
official. . They "appear to be in better spirits approaching the holiday
season," she said.
Economists have cited some key reasons for why
consumers have grown more confident in recent months. Stock prices are
higher. Gasoline prices have leveled off after rising for several
months. And a broad increase in home prices is likely giving would-be
buyers more confidence. When prices rise, buyers don't worry so much
that a home might lose value after they bought it.
question whether the higher level of confidence is sustainable. But
others note that even a weak economy doesn't feel so bad to many
consumers once it begins to make steady improvement.
confidence might have been rattled by this week's Superstorm Sandy.
Disruptions across U.S. industries will slow the economy temporarily,
and some stores and restaurants will draw fewer customers. Some of those
losses won't be made up.
U.S. manufacturing expanded for the second straight month in October, boosted by growth in new orders and production.
Institute for Supply Management said Thursday that its index of factory
activity rose last month to 51.7, up from September's reading of 51.5. A
reading above 50 indicates expansion.
The ISM is a trade group of purchasing managers. Previous surveys showed manufacturing contracted from June through August.
figure is slightly below the average for the year of 52.2. Other
reports have suggested that manufacturing is slowing, hampered by less
business investment and fewer exports. But the ISM survey points to
continued, if gradual, expansion, driven by increased consumer spending.
report is the final look at U.S. manufacturing conditions before
Tuesday's presidential election. The race has been heavily focused on
Stocks jumped after the release of the October
report, along with another report that showed consumer confidence surged
last month to the highest level in nearly five years. The Dow Jones
industrial average, which had already risen about 70 points after the
opening bell, was up 139 points in morning trading.
The survey was
completed before Hurricane Sandy disrupted business activity along the
East Coast and cut power to millions of homes, an ISM spokesman said.
details of the report showed that better consumer spending is helping
some industries, while weaker business investment is slowing others.
industries that reported rising new orders are oriented to consumers.
Those industries include furniture, food and beverages, paper products
and computer and electronics.
The industries reporting falling
orders generally depend more on spending by U.S. and overseas
businesses. Those industries included machinery, electrical equipment,
steel and other metals, and chemical products.
grown more cautious for several reasons. Many are nervous about the
economic outlook overseas. Europe's financial crisis has pushed much of
the region into recession. That has cut into U.S. exports and corporate
Growth has also slowed in China, Brazil and other large developing countries.
also fear large tax increases and big government spending cuts that
will kick in next year if Congress fails to reach a budget deal to avert
Slowing business investment is weighing on economic growth.
Company spending on equipment and software was flat this summer, the
first quarter it failed to increase since the recession ended more than
three years ago.
The economy grew at a 2% annual rate in the
July-September quarter, up from 1.3 percent in the April-June quarter.
Growth increased because of more consumer and government spending,
although the rate is still too weak to rapidly spur job creation.
in a third report, the government said U.S. builders spent more on home
construction in September, a gain that helped offset weakness in
nonresidential building and government projects.
Construction spending grew 0.6% compared to August when spending had fallen 0.1%, the Commerce Department said Thursday.
strength in September came from a 2.8% rise in home building. Spending
on commercial projects such as office buildings and shopping centers
fell 0.1% and spending on government projects was down 0.8 percent, the
third monthly decline.
The September increase pushed construction
spending to a seasonally adjusted annual rate of $851.6 billion, 14.1%
higher than a 12-year low hit in February 2011.
But even with the gain, construction is at roughly half the level considered healthy.
new homes represent less than 20% of the housing sales market, they
have an outsize impact on the economy. Each home built creates an
average of three jobs for a year and generates about $90,000 in tax
revenue, according to the National Association of Home Builders.
builders started work on new homes and apartments at the fastest pace
in more than four years in September. They also requested the most
building permits in four years, a sign that many are confident that
recent gains in home sales will continue.
New home sales in
September jumped to the highest annual pace in the past two and a half
years. Sales of previously occupied homes dipped in September but have
risen steadily in the past year.
Home prices rose in August
compared to July in 19 of 20 major cities tracked by the Standard &
Poor's/Case Shiller index. Prices were up nationally by 2% in August
compared to August 2011, the third straight increase and faster than the
While the housing market has strengthened this year,
the broader economy has lagged behind. The overall economy grew at an
annual rate of 2% in the July to September period. That was an
improvement from 1.3% growth in the April-June quarter but still too
slow to make a significant improvement in unemployment.
Federal Reserve in September said it would spend $40 billion a month to
buy mortgage-backed securities to give a boost to home sales in hopes
that it will support faster economic growth and stronger gains in the