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Consumer confidence in 2nd straight boost

By Hibah Yousuf, staff reporter


NEW YORK (CNNMoney.com) -- A key measure of consumer confidence rose for a second straight month in December, a research group said Tuesday, with outlook for the next few months reaching a 2-year high.

The Conference Board, a New York-based research group, said its Consumer Confidence Index rose to 52.9 in December, from an upwardly revised 50.6 in November.

Economists were expecting the index to climb to 53, according to a Briefing.com consensus survey. The figure, which is based on a survey of 5,000 U.S. households, is closely watched because consumer spending makes up two-thirds of the nation's economic activity.

Still, the overall index remains at historically low levels and is lower than the it was in August at 54.5. A reading above 90 indicates the economy is stable, and 100 or above indicates strong growth.

"I think it's troubling that the consumer confidence remains as low as it is," said Mark Vitner, senior economist at Wells Fargo. "It tells me folks are seeing little tangible improvements in the economic environment, and there's a huge disconnect with what happening in the stock market and what's happening on Main Street. I think it's a warning light for 2010."

The expectation index, which measures consumers' outlook over the next few months, rose to its highest level in two years to 75.6 from 70.3 last month. It reached 75.8 in December 2007.

"A more optimistic outlook for business and labor market conditions was the driving force behind the increase in the expectations index," said Lynn Franco, director of The Conference Board consumer research center. "Regarding income, however, consumers remain rather pessimistic about their short-term prospects and this will likely continue to play a key role in spending decisions in early 2010."

The percentage of those expecting the job market to improve edged higher to 16.2% from 15.8% the previous month. The national unemployment rate improved to 10% last month and employers cut the fewest jobs in November of any month since the start of the recession.

The percentage of consumers expecting business conditions to improve increased to 21.3% from 19.7%. Those expecting a rise in their incomes fell to 10.3% from 10.9% in November.

Vitner, however, discounts the two-year peak.

"People feel the economy is as bad as it's ever been, so you would have to be incredible pessimistic to think it's not going to get better," he said.

Consumer sentiment of the present situation remained downbeat.

The index component that gauges consumers' judgment of the present situation fell to 18.8 in December from 21.2 the previous month. The measure stands at the lowest level since the 17.5 measured in February 1983.

Consumers' evaluation of the job market was mixed. The percentage of those claiming jobs are currently hard to get fell to 48.6% from 49.2%, but the number of consumers claiming that jobs are "plentiful" fell to a new low to 2.9% from 3.1%.

In order for consumer confidence to rise from its current lows, Vitner said employers will have to start hiring again, but he doesn't expect them to take that step in any meaningful way until the middle of 2010.

Last week, the government said the U.S. gross domestic product, the broadest measure of economic activity, grew at an annual rate of 2.2% in the third quarter, according to the final reading.

The figure was below a previous estimate of 2.8%, which itself was downwardly revised from an initial 3.5% reading. To top of page

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