Consumer confidence highest in 5 months

NEW YORK (CNNMoney.com) -- Optimism about the U.S. economy grew in November, pushing the latest reading on consumer sentiment to the highest level since June -- ahead of the holiday shopping period.

The Consumer Confidence Index rose to 54.1 in November, up from a negatively revised 49.9 in October, the Conference Board, a New York-based research group that compiles the index, said Tuesday.

Economists were expecting the index to increase to 52, according to a Briefing.com consensus. The figure, which is based on a survey of 5,000 U.S. households, is closely watched because consumer spending makes up two-thirds of the nation's economic activity.

"Consumer confidence is now at its highest level in five months, a welcome sign as we enter the holiday season," said Lynn Franco, Director of The Conference Board Consumer Research Center. "Hopefully, the improvement in consumers' mood will continue in the months ahead."

Though consumers' assessment of the current state of the economy and job market only rose slightly from the prior month, their outlook for the next few months improved to the highest level since May.

The report showed that the expectations component jumped to 74.2 from 67.5 in October, while the present situation measure rose to 24 from 23.5.

The expectation's index is closely linked to stock prices, said chief U.S. economist Ian Shepherdson of High Frequency Economics, so the spike is likely thanks to improved performance of the market. Stocks began to recover in July and delivered strong gains in September in October.

The percentage of Americans expecting business conditions to pick up over the next several months increased to 16.7% from 15.8% last month, and fewer expected circumstances to worsen.

Consumers were also more positive about job prospects, with 15.5% expecting more jobs in the months ahead, up from 14.5%. And over 10% are anticipating a boost in their incomes, according to the report.

Shepherdson expects the consumer outlook for the economy to continue to improve next month.

"Confidence still remains weak by historic standards, but it is at least now heading in the right direction again," he said.

Sluggish job market and business conditions have dragged the index to a painfully low level. Though the overall index has recovered since reaching a record low of 25.3 in February 2009, it remains volatile and far from a reading above 90, which indicates the economy is stable.

A reading of 100 or above indicates strong growth, and the index has not reached that level since mid-2007.