Lower gas prices helped boost September’s Consumer Confidence Index, which rose to 104.5, up from an adjusted 100.2 in August, and beating the consensus estimate of 103.
Meanwhile, analysts said an early outbreak of cooler weather in much of the country is driving demand for fall apparel and has bolstered foot traffic in malls.
“A more favorable assessment of current conditions coupled with a less pessimistic short-term outlook boosted consumer confidence this month. However, even though consumers’ concerns have eased, there is little to suggest a significant change in economic activity as we enter the final quarter of 2006,” said Lynn Franco, director of the Conference Board Consumer Research Center.
The Conference Board, which conducts the monthly survey via the assistance of research firm TNS, said both components of the index rose from last month’s levels. The Present Situation Index increased to 127.7 from 123.9, while the Expectations Index rose to 89 from 84.4 last month.
Maury Harris, economist at UBS, wrote in a research note that while the sharp drop in gasoline prices bolstered consumer sentiment in September, the Consumer Confidence Index still “showed a net decline from July.”
The economist said the Expectations Index “looks consistent with a trend in real consumption growth of around 3 percent at an annual rate.” He explained that this index correlates more closely with the rate of growth in consumer spending than either the Present Situation or overall confidence indices.
According to the Conference Board, consumers who said ongoing conditions were “good” in September increased to 27.4 percent from 26.2 percent, while those claiming conditions are “bad” fell to 15.4 percent from 16.6 percent. On the jobs front, the sentiment was mixed regarding labor market conditions. Consumers who said jobs are “plentiful” rose to 25.9 percent from 24.5 percent, but those claiming that jobs are “hard to get” also inched up to 21.3 percent from 21.1 percent last month.
The outlook for the next six months was slightly better, with those believing that business conditions would worsen dropping to 10.6 percent from 12.9 percent. However, those saying that business conditions will improve was essentially flat at 16.3 percent.
Regarding mall and store traffic, chilly weather is accelerating retail sales at both specialty and department stores.
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“It has been cooler virtually every week in September this year versus the same time last year. The only exception has been California,” said Kimberly Greenberger, specialty apparel retailing analyst at Citigroup Global Markets Inc.
Currently, “wear-now” items have become a main draw across all demographics, and newness in the marketplace for fall has provided and extra boost to consumer spending, independent analyst Jennifer Black said in a report.
Moving into October, Greenberger is expecting a strong demand in fleece, sweaters and outerwear, categories that saw dismal sales in September of last year.
According to a report published by Planalytics, a business weather intelligence service based in Pennsylvania, weather-driven demand for fleece will be 50 percent higher nationally than last year. There will also be a 39 percent increase in sweaters and a 37 percent jump in demand for lightweight outerwear.
Pants will also regain their status after a lackluster start to the fall season. “Up until late August, retailers were still seeing strong demand for shorts,” Greenberger said. “As we see cooler weather roll in, pants should start regaining their position over shorts for the fall.”
American Eagle, Abercrombie & Fitch, Aéropostale and The Children’s Place are expected to perform well, supplying compelling fall merchandise and trend-right selections of key categories.