U.S. Consumer Sentiment Slips In November

By Anna Louie Sussman

U.S. consumer confidence slipped at the end of November, suggesting retailers could face a challenging holiday season.

The University of Michigan final consumer sentiment index for November fell to 91.3 from a midmonth reading of 93.1. It was an increase from October's final reading of 90.0. Economists surveyed by The Wall Street Journal had predicted the final November index would edge down slightly to 93.0.

Consumer sentiment is still near the past six months' average of 91.6, but Americans' spending habits haven't matched their rosy outlook. After more than a year of low gas prices and steady job creation, many areas of the retail market remain lackluster.

Wages have been slow to rise, and prices of necessities like medical care and shelter are climbing, eating up larger shares of workers' paychecks. Consumer sentiment is also sensitive to market gyrations: a tumbling stock market pushed the index to a 2015 low of 87.2 in September after reaching 96.1 in June.

"The data indicate that consumers have become increasingly aware of economic cross currents in the domestic as well as the global economy," said Richard Curtin, the survey's chief economist.

A report from the Commerce Department released Wednesday showed U.S. consumers ratcheted up savings rather than spending in October. The personal saving rate climbed to 5.6% in October, the highest level since December 2012.

The slight advance from October's final reading was entirely due to lower income households, Mr. Curtin said. Households at the higher end of the income spectrum are more exposed to financial markets.

"Households with incomes in the top third of the distribution, who account for more than half of all spending, expressed a more cautious optimism," he said, reflecting "somewhat weaker personal financial prospects."

Still, the reading of 91.3 was 2.8% higher from November a year ago.

The expected change in inflation rates edged back up to 2.7% from a midmonth reading of 2.5%, which had been the lowest reading since January. Consumers said they expect inflation of 2.6% over the next five years.

Another gauge of consumer sentiment compiled by The Conference Board plunged to its lowest level in more than a year, the private research group said Tuesday.

That dive, combined with a fall in the "future expectations" component of the University of Michigan index, could portend a downward trajectory for consumer sentiment going forward.

"We see some risks for the Michigan index to drift lower over the next few months as the rising geopolitical tensions and fallout from the terrorist Paris attacks sap domestic consumer confidence," said Millan Mulraine, an economist at TD Securities USA, in a note to clients.

Consumer spending accounts for roughly two-thirds of overall economic output in the U.S. Retailers hoping that continued low gasoline prices and a robust job market will unleash spending have so far been disappointed.

Another report released Tuesday by the Commerce Department showed that overall consumer spending increased at a 3% rate in the third quarter, down from the second quarter's 3.6% pace. The recent gain was led by strong spending on long-lasting goods, like automobiles.

U.S. retail sales barely edged up in October after stalling for two months, the Commerce Department reported earlier this month. Consumer spending at retailers climbed just 1.7% since October 2014, compared with a 4.7% annual increase the year before, even though Americans have enjoyed cheap gasoline for more than a year.

"If consumers are not happy and healthy out in the marketplace spending on goods and services, particularly in the key holiday spending season, there is very little hope for sustaining the current status quo, let alone optimism to anticipate additional momentum from the U.S. economy in the near-term," said Lindsey Piegza, chief economist at Stifel Economics, in a note to clients.

Wal-Mart Stores Inc.'s sales edged up slightly in the third quarter, but over half of its sales are groceries. Home Depot Inc. also had a strong third quarter, but retailers like Macy's Inc., Nordstrom Inc., and Dick's Sporting Goods reported weak third-quarter results.

The National Retail Federation predicts holiday sales will rise 3.7%, only slightly less than last year's 4.1% gain.

Write to Anna Louie Sussman at anna.sussman@wsj.com