January 3, 2012 (Chris Moore)

Consumer confidence improved for the fourth consecutive month in December as better economic news at the end of the year was reflected in more optimistic expectations for the coming year according to the latest Surveys of Consumers by Reuters/University of Michigan.

News of improved employment numbers were frequently cited by consumers in December’s survey and are the most likely cause for the boost in consumer confidence.

Twenty-nine percent of the consumer’s surveyed expected good times economically in 2012, up from 19 percent in November, and up from the low of 14 percent last August.

Although the news of the employment gains may have led to an increase in expectations for next year, consumer’s views of their own personal finances continued to be dismal.

For the 49th consecutive month, more consumers reported that their finances had worsened rather than improved with income declines mentioned twice as frequently as income increases.

Consumers also continued to have a negative view about their own financial outlook in 2012 with only one-in-ten expecting their living standard to improve in the coming New Year and only one-in-four expecting their personal finances to improve.

All three indices that make up the Index of Leading Economic Indicators posted gains again in December, but were still down from last year’s levels.

The Consumer Sentiment Index climbed 9.0 percent to 69.9 in December, up from 64.1 in November but down 6.2 percent from 74.5 in December of last year.

The Consumer Expectations Index increased to a level of 63.6 in December, up 14.8 percent from a level of 55.4 in November and down 5.8 percent from a level of 67.5 in December 2010.

The Current Conditions Index climbed 2.6 percent to 79.6 in December, up from 77.6 in November but down 6.7 percent from 85.3 in December of last year.

Richard Curtin, Surveys of Consumers chief economist said, “Given the continued weakness in consumers’ assessments of their personal finances, the Congressional stalemate on extending the payroll tax holiday could easily reverse the recent gains. To be sure, consumers have come to expect last minute action by the Congress, not inaction on such a vital issue. If the payroll tax holiday is not extended, it would be a significant drag on economic growth, and would increase the likelihood that weakness in consumer spending would again put the economy at risk of a renewed downturn. Even a month long delay would heighten uncertainty and cause consumers to begin to take precautionary actions.”

Congress eventually passed the Social Security tax reduction just before the Christmas recess, but for only two months, which only adds to the uncertainty for the coming year and could stall consumer spending until a more permanent solution is found.

Tags: Surveys of Consumers, Reuters/University of Michigan, consumers, economic slowdown, finances, recession, financial expectations

Source:
Reuters/University of Michigan