A leading consumer confidence index rose in December, the fourth straight monthly increase, but the stalemate in Washington over extending the payroll tax cut could cut into those gains.
Consumers were much more positive about the overall economic prospects this month compared to November, according to the latest Thomson Reuters/University of Michigan Survey of Consumers released Thursday. The percentage of respondents expecting good economic times ahead increased to 29% from 19% in November, though the figure was still historically low.
The boost in consumer confidence, combined with a continued drop in weekly jobless claims Thursday, helped investors overcome disappointment in a downward revision to third-quarter economic growth data. The Dow Jones industrial average was up about 34 points in early trading.
The survey's broader consumer confidence index was at 69.9 in December, up from 64.1 in November and a sharp increase from the 55.7 level in August. The index was at 74.5 last December.
Still, most consumers said 2011 was a bad year. A majority reported that their personal financial condition was worse this year, and only about a quarter anticipated things would improve in 2012.
"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," Richard Curtin, the survey's chief economist, said of the tax break that will expire on Dec. 31 unless lawmakers pass an extension. "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," Curtin warned.
[For the record, 10:06 a.m.: An earlier version of this post incorrectly said the consumer confidence survey and the jobless-claim data were released Friday.]
-- Jim Puzzanghera in Washington
Photo: Holiday shoppers in New York City on Wednesday. Credit: Bloomberg