NEW YORK (TheStreet) -- A surprise drop in consumer confidence gave a shock to markets on Tuesday, conflicting with investors' optimism over the return of the spend-happy shopper.
November consumer confidence fell to 88.7, down from 94.1 in October and its lowest level since June, far below economists' expectations for an increase to 96. Rosier forecasts had been predicated on the view that recent declines in oil prices would bolster consumer spending.
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Though the drop was unanticipated, optimistic forecasts for consumer spending growth over the critical holiday shopping season remain unchallenged.
"If people have money, they'll spend it," said Eric Marshall, portfolio manager at Hodges Funds, in a call. "We're more optimistic about what we're hearing from the retailers, restaurant companies and consumer product companies this year versus last year."
Of course, it helps that consumer spending this quarter has the advantage of an easy year-on-year comparison. Shopping malls were deserted last year as consumers struggled with harsher-than-normal winter storms and an unemployment rate stubbornly sticking around 7%.
Consumer spending was one of the better-than-expected components of third-quarter GDP data out Tuesday morning. Spending increased 2.2% over the quarter, compared to an initial estimate of 1.8% growth, according to the Department of Commerce.
"We are actually looking for a modest shift up in consumption. That will start in the fourth quarter," RBC Capital Markets' Tom Porcelli told CNBC. "We are looking for this modest acceleration to 2.5% [over the quarter]." Porcelli added that through to 2015, consumer spending could increase to 2.7%.