Consumer Sentiment and Spending Make Small Gains

December 23rd, 2010 by

The outlook for the U.S. economy continues to be more positive during the 4th quarter of 2010, analysts say. For the 5th month in a row in November, new jobless claims were down 3,000 to a seasonally adjusted 420,000, according to the Labor Department. This decrease points to Americans’ increased optimism concerning the job market. Furthermore, while the economy is hardly recovering in leaps and bounds, the rise of the consumer sentiment’s index to 74.5 is proof that there is some improvement underway.

In addition to decreased jobless claims, Americans are returning to buying a little more. Economists watch consumer sentiment so closely because it is tied to how much people are willing to spend; during the 4th quarter, sentiment has matched spending, with both seeing small increases. New home sales have increased 5.5% to a seasonally adjusted 290,000 unit annual rate. Stock prices are rising slightly, debt is going down slightly, and some reports indicate that consumers are even dipping into their savings to fund purchases.

Online retail spending also saw a boost this year; so far, it is up 12% this holiday season. Last year, Americans spent about $25.3 billion online, compared to $28.4 billion this year (report by ComScore). Likewise, online spending for last weekend compared to the same weekend the year before was also higher; it jumped about 17%, and accounted for about $5.5 billion in sales. This amount has also set a new record for top week of online spending. A good indicator for positive consumer sentiment can be seen in ComScore’s observation that jewelry/luxury goods/accessories was the top growing online retail subcategory in November, with leading sites visited including Bradford Exchange and Coach. Furthermore, ‘Free Shipping Day’ (December 17th) was the biggest spending day in online history. As consumers feel a little more stable in their economic situation, they are more willing to spend money on non-essentials.

As noted by Joseph Lazzaro for Daily Finance, the last piece missing in the economic equation is job growth. This area, he notes, “is one of the last indicators to turn positive in a big way.” With continued decline in unemployment rates, and increased economic optimism, consumer sentiment and buying could increase in the coming year.