Washington - Confidence among consumers climbed to a five-year high in November, improving the prospects of bigger spending gains that will help spur the expansion.
The Thomson Reuters/University of Michigan preliminary consumer sentiment index rose to 84.9, the fourth straight increase and the highest since July 2007, from 82.6 in October. Economists projected an initial reading of 82.9 for November, according to the median estimate of 71 economists surveyed by Bloomberg.
The report showed the employment gains, cheaper gasoline and rising home values that are lifting Americans' spirits may translate into a pickup in purchases, which account for about 70 percent of the U.S. economy. For retailers such as Kohl's Corp., more optimism may lay the foundation for bigger cash register receipts during the coming holiday shopping season.
"This is a slow, uneven economy that continues to mend," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York. "The confidence numbers reflect a little bit better job growth in the quarter and I think they reflect the news on housing that has really been pretty good."
Another report Friday showed inventories at U.S. wholesalers rose 1.1 percent in September, the most this year, after a 0.8 percent a month earlier. The median projection of economists surveyed by Bloomberg was for a 0.4 percent advance.
Estimates for the confidence measure ranged from 74.7 to 86, according to the Bloomberg survey. The index averaged 64.2 during the last recession and 89 in the five years leading up to the 18-month economic slump that began in December 2007.
Even with the gain in confidence, the so-called fiscal cliff of tax increases and government cutbacks scheduled to take effect next year serves as a reminder to households that the expansion faces hurdles.
"We know that the economy is going to be tough, but we believe that the focus on value and gifting will win over the consumer in what we expect to be, as always, a very competitive holiday season," Kevin Mansell, chief executive officer of Menomonee Falls, Wis.-based retailer Kohl's, said on a Nov. 8 earnings call.
The Michigan index of consumer expectations six months from now, which more closely projects the direction of consumer spending, increased to 80.8, the best reading since July 2007, from 79 in October. The gauge of current conditions rose to 91.3, the highest since January 2008, from 88.1 the prior month.
The Bloomberg Consumer Comfort Index also climbed last week as Americans' ratings of the economy reached the highest level in more than four years.
Twenty percent of those surveyed had a positive view of the world's largest economy, the most since March 2008.