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Consumer confidence index surges in December

2011/12/28

 NEW YORK (AP) -- Americans are gaining faith that the economy is on the upswing.

An improving job outlook helped the Consumer Confidence Index soar to the highest level since April and near a post-recession peak, according to a monthly survey by The Conference Board.

The second straight monthly surge coincided with a decent holiday shopping season for retailers, though stores had to heavily discount to attract shoppers.

The rise in confidence jibes with a better outlook for the overall economy. An Associated Press poll of three dozen private, corporate and academic economists projects U.S. economic growth will speed up in 2012, if it isn't derailed by upheavals in Europe.

But confidence is still far below where it is in a healthy economy. And Americans' mood could sour again if the debt crisis in Europe deepens and spreads to the U.S. Shoppers still face big obstacles — higher costs on household basics and a still-slumping housing market.

"This is encouraging. It's good to be talking about improvement," said Mark Vitner, an economist at Wells Fargo. "But there is still a lot of room for trouble."

The Conference Board, a private research group, said Tuesday that its Consumer Confidence Index rose almost 10 points to 64.5 in December, up from a revised 55.2 in November. Analysts had expected 59. The level is close to the post-recession high of 72, reached in February.

The December surge builds on a big increase in November, when the index rose almost 15 points from October. That month's reading was the lowest since March 2009, the depths of the recession.

One component of the index that measures how shoppers feel now about the economy rose to 46.7 from 38.3 in November. The other barometer, which measures how shoppers feel about the next six months, rose to 76.4 from 66.4.

In particular, shoppers' assessment of the job market improved, according to preliminary results of the survey conducted Dec. 1-14. Those anticipating more jobs in the months ahead increased to 13.3 percent from 12.4 percent while those anticipating fewer jobs declined to 20.2 percent from 23.8 percent.

Economists watch confidence numbers closely because consumer spending — including items like health care — accounts for about 70 percent of U.S. economic activity.

Americans have more reason to be optimistic. The economy has produced at least 100,000 new jobs for five months in a row, the longest such streak since 2006. The number of people applying for unemployment benefits has dropped to the lowest level since April 2008.

According to the AP poll of economists, conducted Dec. 14-20, the U.S. economy is expected to grow 2.4 percent next year. In 2011, it likely grew less than 2 percent.

"We're starting to make some progress," said Kathy St. Louis of Atlanta, who was picking up lunch Tuesday at CNN Center. "It could always be better, but we're trying to move in the right direction." She said she spent $700 on holiday presents, up from the $300 she spent last year, even though not much changed with her paralegal job.

Ahlum Beruk, 22, a Greenville, Miss., resident who was visiting Atlanta, was a student last year and worried about finding a job. This year she works for a hotel and spent about $100 on Christmas presents. She spent nothing on gifts last year.

"I do feel better because I have a job now, and I didn't before," she added.

Shoppers still face many hurdles. In fact, while the job market is steadily improving, the unemployment rate is still high at 8.6 percent. And housing remains wobbly. The Standard & Poor's/Case-Shiller index of home prices, also released Tuesday, dropped in October in 19 of the 20 cities it tracks. It was a second straight declining month, further evidence of a bumpy housing recovery

Lynn Franco, director of The Conference Board Consumer Research Center, noted renewed fears about a second recession hurt confidence last summer.

"While consumers are ending the year in a somewhat more upbeat mood, it is too soon to tell if this is a rebound from earlier declines or a sustainable shift in attitudes," Franco said. "Have we rebounded from a summer lull or are we turning the corner?"

In fact, even with the increase in confidence, shoppers have been focused on deals this holiday season. Shoppers, enticed by expanded hours and bargains, packed stores for the start of the holiday season, resulting in discount-fueled record spending. But then they retreated for a few weeks to wait for better deals.

Based on the stronger-than expected start and rising optimism that more spending was to come in the finale, the National Retail Federation earlier this month upgraded its holiday sales growth forecast to 3.8 percent, from the original forecast of 2.8 percent made in September. More data will be released this week that will help quantify the last-minute sales surge.

Still unclear is how the discounting will affect stores' profit margins. It might not be all bad for retailers: Roxanne Meyer, a retail analyst at UBS Investment Research, says post-Christmas markdowns were not as deep as expected, with less than half of retailers she surveyed increasing promotions from last year.