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Consumer sentiment rises
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November 9, 2001: 10:47 a.m. ET
Closely watched U. of Michigan index rose in November: report.
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NEW YORK (CNNmoney) - A closely watched measure of consumer confidence rose in the United States in November, according to a published report Friday, a sign that Americans may have begun to shake off the effects of the Sept. 11 attacks and the slumping economy.
The University of Michigan's preliminary consumer sentiment index for November rose to 83.5 from 82.7 in October, according to a Reuters report. Economists surveyed by Briefing.com expected sentiment to fall to 78.5.
"Households are maintaining relatively optimistic assessments of economic conditions, largely in defiance of actual events," said Steven Wood, economist with FinancialOxygen.
Consumer confidence - watched closely since consumer spending fuels two-thirds of the economy - had fallen sharply after the Sept. 11 attacks, dragged down by uncertainty about the war on terrorism, the health of the global economy and mounting job cuts.
Most economists expect a recession, commonly defined as two consecutive quarters of shrinking gross domestic product (GDP), to follow the attacks, and companies have cut hundreds of thousands of jobs in response to the slowdown in the world's largest economy.
The report came the same day that the government reported that prices at the wholesale level tumbled 1.6 percent in the United States last month, the biggest decline since the government began keeping records in 1947.
On Wall Street, stocks reversed course several times of the course of the day as investors digested all the data.
To keep consumers spending, the Federal Reserve has cut its target for interest rates 10 times this year, taking short-term rates to their lowest level since 1962.
The rate cuts and a rebound in stock prices in the weeks since the attacks helped lift consumer sentiment, economists said. Though confidence is still much weaker than it was, say, a year ago, it couldn't fall forever.
"Immediately after the terror attacks, we were shell-shocked and stopped doing everything but watching television," said Sung Won Sohn, chief economist for Wells Fargo & Co.
"But give people more information, and we can incorporate it into our thinking process," Sohn said. "We can attach and assign probabilities and then more or less go on with our normal lives. I think that's exactly what's unfolding."
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The University of Michigan's current conditions index, which gauges Americans' views on their present financial situation, rose to 94.9 in November from 94.0 in October, according to Reuters, which quoted people who have seen the report. And the expectations index, which tracks consumers' attitudes about the coming year, edged up to 76.2 in November from 75.5 in October, the report said.
"With unemployment set to breach 6 percent over the next few months, people's view of the current economy is bound to deteriorate," said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd. "But expectations are what matter for spending, and at this level the numbers suggest consumers spending will rise, albeit not rapidly."
The university's preliminary reading is based on telephone interviews with 250 Americans across the country on personal finances, business conditions and buying. The survey, which is updated later each month and has been conducted since 1946, is released to paying subscribers. 
-- from staff and wire reports
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