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HomeNewsEconomyConsumer Confidence Rises, But Misses Trumped-Up Expectations

Consumer Confidence Rises, But Misses Trumped-Up Expectations

Consumer spending

(Photo: REUTERS)

Consumers confidence increased in the U.S. economy as the year 2014 draws to a close, according to a closely watched private report released Tuesday.

The Conference Board, a private research group, said its index of consumer confidence increased to a two-month high of 92.6 in December, up from a revised 91.0 in the month of November. The prior month was initially reported as 88.7.

While the index increased, economists surveyed by The Wall Street Journal had forecast the latest index to rise to 94.0.

The present situation index, which is a gauge of consumers’ assessment of current economic conditions, jumped to 98.6 from an upwardly revised 93.7 (91.3 initial). Still, the December reading is the highest since February 2008.

Unfortunately, consumer expectations for economic activity over the next six months actually fell to 88.5, down from an initially reported as 87.0.

“Consumer confidence rebounded modestly in December, propelled by a considerably more favorable assessment of current economic and labor market conditions,” said Lynn Franco, director of economic indicators at the board.

The modest increase in the board’s measure comes after last week’s report from Reuters and the University of Michigan, which doesn’t jive with the latest results. Still, their final-December survey of consumer sentiment showed the index increased to the highest reading since January 2007, nearly an 8-year high.

Consumers account for two-thirds of economic growth in the U.S. economy, particularly in the fourth quarter when the holiday shopping season is needed to prop up slowdowns in other sectors.

However, this year’s holiday shopping season started off slowly. For instance, consumers spent an average 6.4 percent less on in-store purchases than they did on Thanksgiving weekend last year, according to a report from the National Retail Federation.

Later reports suggest sales during the Christmas week increased modestly, however. And according to Redbook Research, “profit margins are expected to be under pressure due to the highly promotional environment.”

According to the board, consumers in December were more optimistic about current labor markets, but feel uncertain about the future of their job prospects.

In December, 17.1 percent of consumers said they think jobs are “plentiful,” compared with 16.2 percent thinking that in November. But 27.7 percent this month said jobs were “hard to get,” though it was down from 28.7 percent last month.

The number of respondents who believe there will be more jobs in the next six months also fell to 14.7 percent this month, down from the 15.5 percent of respondents who said that in November. The number of respondents anticipating fewer jobs increased to 16.9 percent from 16.1 percent.

Wage growth over the last five years have been completely disappointing, and income expectations in the survey were unsurprisingly mixed. The survey found just 16.4 percent of households in December expect their incomes to rise in the next six months, down from 16.9 percent saying that last month. However, only 10 percent now think their incomes will decline in the next 6 months, down from 11 percent saying that in November.

Written by

PPD Business, the economy-reporting arm of People's Pundit Daily, is "making sense of current events." We are a no-holds barred, news reporting pundit of, by, and for the people.

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