December 11, 2010 in Business

Consumer sentiment improves

Number is best since June, but below pre-recession levels
Ruth Mantell MarketWatch
 

WASHINGTON – A gauge of U.S. consumer sentiment rose in early December, reaching the highest level since June, but remains below pre-recession levels, according to the Reuters/University of Michigan index released Friday.

The gauge climbed to 74.2 in early December from 71.6 in November. Economists surveyed by MarketWatch had expected a December result of 72.9.

Despite the gain in December, the gauge is below pre-recession levels of more than 80. While there have been some signs of improvement in the economy, consumers remain concerned about jobs. Last week the government reported that the U.S. economy added only 39,000 nonfarm payrolls in November, below the 155,000 increase expected by Wall Street.

Analysts saw reason for optimism in Friday’s sentiment report.

“The rally in equities and job growth (still slow but growing nonetheless) are giving Americans a reason to be more hopeful. And there is nothing wrong with that,” wrote Jennifer Lee, senior economist at BMO Capital Markets, in a research note.

TD Securities economics strategist Millan Mulraine noted that the sentiment report “underscores the very positive momentum” beginning in the economy.

“Moreover, with consumer spending accounting for a significant portion of overall economic activity, the improving consumer sentiment is likely to bolster the growth performance of the economy even further if it translates into increased consumer spending. A virtuous cycle indeed,” Mulraine wrote.

Also Friday, the Michigan sentiment report showed that a gauge of U.S. consumers’ views on current conditions rose to 85.7 in December from 82.1 in November, while a reading on their expectations increased to 66.8 from 64.8.

The one-year inflation expectation fell to 2.9 percent from 3 percent, while the five-year inflation outlook fell to 2.7 percent from 2.8 percent.

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