ANN ARBOR—Consumer confidence rebounded in November. While the November gain erased the loss recorded in the prior month, it still left consumer confidence at a weakened level. "Although consumers viewed prospects for the national economy somewhat more favorably, they did not change their grim assessments of their own financial situation," according to Richard Curtin, the Director of the University of Michigan’s Surveys of Consumers. Consumers more frequently reported hearing news of favorable economic developments, more frequently reported low inflation and low interest rates and more frequently expected the economy to improve by mid 2003. Unfortunately, consumers also expressed greater concerns about their personal finances, more frequently reported income declines and were more likely to expect smaller income increases for the year ahead. "While the November gain eased concerns about a renewed downturn, it did not entirely erase these concerns. Consumer spending is likely to be weak during the balance of the year and during the first half of 2003, providing little cushion to absorb any continued weakness in business investment spending," Curtin said. As long as the possibility of war with Iraq continues to heighten fears about renewed terrorist attacks on U.S. soil, the pace of consumer spending will remain subdued. The Index of Consumer Sentiment was 84.2 in November 2002, rebounding from 80.6 in October 2002, but still below the September reading of 86.1 and the recent high of 96.9 in May. The Index of Consumer Expectations, a closely watched component of the Index of Leading Economic Indicators, was 78.5 in November, reversing nearly the entire October loss, but it was still well below the 92.7 recorded six months ago. "Four-in-ten consumers reported in the November survey that their financial situation had worsened during the past year. This was the worst assessment of their current finances by consumers in ten years," Curtin said. More importantly, consumers were more pessimistic about their future financial prospects than any other time during the past year. The recent cut in interest rates has had little impact on buying plans. "References to the availability of low mortgage rates remained largely unchanged following the cut in interest rates by the Fed, while references to low interest rates on loans for vehicles and other consumer goods actually declined in November compared with prior months," Curtin said. Overall, the data indicate that sales of vehicles will remain well below the third quarter pace during the year ahead. Gains in holiday spending are likely to be less than last year’s increases. Despite the recent election victories, consumers were more dissatisfied with fiscal policies as confidence in the government’s economic policies fell to its lowest level since President Bush first entered office, with as many consumers rating policies favorably as unfavorably in November.