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Consumer confidence reaches 3-month high, expectations at 2-year high

December 29, 2009 |  9:57 am

Consumers are looking forward to 2010, with confidence hitting a three-month high and expectations zooming to their highest point in two years, according to a consumer confidence study released today.

But Americans still feel pessimistic about their current state, according to the Conference Board. The nonprofit’s present situation index plunged to its lowest point in 26 years.

“While the worst of the economic times are behind us, it’s not euphoria,” said Lynn Franco, director of the organization’s Consumer Research Center. “It seems like we’re once again moving in the right direction, but there’s still a ways to go. Confidence is stronger than when we started the year, but for much of the last several months, we’ve been moving sideways.”

The consumer confidence index rose to 52.9 in December, after increasing to 50.6 in November from October’s 48.7 and February’s historic low of 25.3.

But confidence is still shaky, according to the index, which last reached a “stable” 90.6 reading in 2007, Franco said. The data are based on a monthly survey conducted by research firm TNS covering a sample of 5,000 U.S. households.

Consumer spending, however, is still moving ahead at “fairly respectable rates” of 2.8% for the third quarter and a projected 2% for the fourth, according to Brian Bethune, chief U.S. financial economist for IHS Global Insight.  Spending is being helped along, he said, by steep discounts and inventory clearance sales, as well as year-end sales incentives in the auto market.

“However, this inventory clearing activity may create a vacuum in early 2010 -- barring a New Year’s miracle in the labor markets, it will be an enormous challenge to maintain forward momentum on real consumer spending early next year,” Bethune said in a statement.

Still, expectations are high for the next six months, buoyed by improvements in the business and labor markets. The Conference Board index jumped to 75.6 from 70.3 in November, reaching the highest level since the 75.8 recorded in December 2007.

But worries about short-term income, which Franco said will likely affect spending decisions early in the new year, dragged down the present situation index to 18.8 from 21.2 in November. The index previously hit a low of 17.5 in February 1983.

More than 46% of respondents said business conditions were “bad,” up from 44.5% the month before. Just 7% considered the situation to be “good,” compared to just over 8% in November.

But more than 21% said they anticipated conditions would improve by mid-2010, up from 19.7%. Just 11.9% of respondents said they expected the situation to deteriorate, down from the 14.6% who said the same in November.

Consumers had mixed feelings about the job market. Although 3.1% said in November that jobs were “plentiful,” just 2.9% said the same in December. However, fewer people said jobs were “hard to get” – 48.6% as compared to 49.2% last month.

More than 16% of consumers said they expected more jobs to open up soon, slightly higher than in November. Just 20.7% said they expected fewer jobs to be available, down from the 23.1% who were pessimistic on that point last month.

-- Tiffany Hsu

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