Consumers Give U.S. Economy a Lift Before Election
By CHRISTOPHER S. RUGABER, AP Economics Writer
WASHINGTON (AP) - A flurry of reports Thursday showed that U.S. consumers are growing more confident and spending more, boosting a still-weak economy just five days before the presidential election.
Consumer confidence surged in October to its highest level in nearly five years. Americans were encouraged by recent declines in the unemployment rate. And they responded by spending more on cars and trucks, at retail businesses and on goods produced at U.S. factories.
Still, businesses remain nervous about where the economy is headed and that could weigh on hiring. The October jobs report, to be released Friday, is expected to show another month of tepid job growth. Superstorm Sandy could slow growth slightly in the final months of the year.
For now, the stock market welcomed the signs of improved economic health. The Dow Jones industrial average jumped 128 points in midday trading, and broader indexes also increased.
"While short of any glowing upside surprises ... U.S. economic data are at least all moving in the right direction," Robert Kavcic, an economist at BMO capital Markets, said in note to clients.
Thursday's reports showed:
- The Conference Board's consumer confidence index rose to 72.2 last month. That's the highest reading since February 2008. While the index is still below the 90 reading consistent with a healthy economy, it has risen from a reading of 40.9 a year ago. That's the biggest one-year increase since 1994, Kavcic said.
- Sales in retail stores open at least one year rose 5 percent in October, according to a tally from 21 retail chains by the International Council of Shopping Centers. That was better than analysts expected. Some of that increase may reflect higher spending for generators, batteries, water and other supplies in preparation for Superstorm Sandy.
- Manufacturing expanded for the second straight month, largely because of higher consumer demand. The Institute for Supply Management, a private trade group, said its index of factory activity ticked up to 51.7 in October from 51.5. A reading above 50 indicates expansion. Factory activity is growing again after contracting from June through August. October's reading was still slightly below the average for the past year of 52.2.
- Weekly unemployment applications fell 9,000 to 363,000 last week. That suggests hiring is unlikely to pick up much from its current pace of about 150,000 new jobs a month.
- A report by payroll provider ADP showed that businesses added 158,000 jobs last month, up from 114,000 in the previous month. ADP updated its methodology for the October report. It has frequently diverged sharply from the government's figures.
- Auto sales also rose in October, even though the storm caused dealers on the East Coast to lose three days of business. Toyota sales rose almost 16 percent, Chrysler's 10 percent and General Motors was up 5 percent. Ford sales increased only slightly.
- Construction spending rose 0.6 percent in September, the Commerce Department said. A healthy gain in spending on home construction and renovation outpaced declines in commercial and government building.
- Manufacturing in China also improved in October, although the two surveys released Thursday show factory activity in the region is still struggling to grow. The reports are rare good news for the world economy, which has weakened because of Europe's chronic debt crisis and slower growth in emerging markets such as China, India and Brazil.
The U.S. economy expanded at a 2 percent annual pace in the July-September quarter, up from 1.3 percent in the second quarter. Most economists expect growth may slow a bit in the fourth quarter, partly because of disruptions from Superstorm Sandy.
Still, the economy is growing too slowly to rapidly bring relief to roughly 12 million out-of-work Americans. With the unemployment rate still high, steady growth of more than 3 percent is generally needed to create a sufficient number of jobs.