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Consumer Confidence Decreases Despite Holiday Spending

The national consumer Confidence Index fell to 52.5 in December, from 54.3 last month, despite reports showing holiday spending posted the biggest gain in five years. The drop also is at odds with a University of Michigan report that showed consumer sentiment had improved to a six-month high in December.

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The median forecast for confidence, based on a survey of 61 economists, projected confidence would increase to 56.3. The Conference Board revised the November figure to 54.3 from a previous estimate of 54.1. Projections for December had ranged from 53 to 60.

The index averaged 96.8 during the last economic expansion that ended in December 2007.

Said Lynn Franco, Director of the Consumer Research Center at The Conference Board: “Despite this month’s modest decline, consumer confidence is no worse off today than it was a year ago. Consumers’ assessment of the current state of the economy and labor market remains tepid, and their outlook remains cautious. Thus, all signs continue to suggest that the economic expansion will continue well into 2011, but that the pace of growth will remain moderate.”
Consumers’ appraisal of present-day conditions was slightly more pessimistic than in November. The percentage of consumers claiming business conditions are “bad” decreased to 41.2% from 42.9%, however, those claiming business conditions are “good” declined to 7.5% from 8.5%. Consumers’ assessment of the labor market was less favorable than last month. Those saying jobs are “plentiful” decreased to 3.9% from 4.3%, while those stating jobs are “hard to get” edged up to 46.8% from 46.3%.

Consumers’ expectations were slightly less optimistic than in November. Those expecting an improvement in business conditions over the next six months edged up to 16.6% from 16.4%, while those anticipating
business conditions will worsen edged down to 12.1% from 12.4%.

Consumers remained mixed about future job prospects. Those anticipating fewer jobs in the months ahead increased to 19.5% from 19.1%, while those expecting more jobs declined to 14.3% from 15.1%. The proportion of consumers expecting an increase in their incomes decreased to 9.9% from 11.1%.