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Consumer mood improves ahead of holidays

U.S. consumer sentiment improved in early December on signs of stabilization in the labor market and widespread discounts to entice holiday shoppers.
/ Source: Reuters

U.S. consumers felt better in December, as the job market shows signs of improvement and retailers dangle steep discounts to goose up holiday sales, a survey released on Friday showed.

This better outlook has opened up the wallets of consumers. Earlier on Friday the government reported retail sales jumped 1.3 percent last month, much stronger than Wall Street had expected.

The Reuters/University of Michigan Surveys of Consumers said its preliminary index of sentiment for December rose to 73.4, just a touch below the year's high set in September.

Improved consumer sentiment is an omen for higher consumer spending which accounts for 70 percent of the U.S. economy.

The latest figure was higher than the 67.4 for November. It was also higher than economists' median expectation of a reading of 68.5 according to a Reuters poll.

The survey's gauge of current economic conditions jumped to 79.1 in early December from 68.8 in November. This was the highest since March 2008 when it was 84.2.

The barometer on consumer expectations rose to 69.7 from 66.5 in November.

"Confidence improved in early December mainly due to widespread price discounting by merchants attempting to spark holiday sales as well as somewhat more positive expectations for economic growth and employment," Richard Curtin, director of the Reuters/University of Michigan Surveys of Consumers, said in a statement.

Deep discounts have boosted year-end holiday sales, but Curtin cautioned the spending spike requires job and income growth as well as greater credit availability.

Unemployment at 26-year high
U.S. unemployment is at a 26-year high even with the recent slowdown in layoffs.

Still, favorable conditions to buy big household items like furniture and appliance were at their strongest in two years, according to the latest survey results.

The survey's reading on buying conditions for household durables propelled to 132 in early December from 114 in late November.

Among the signs that this sentiment rebound could be sustained, the surveys' 12-month outlook gauge jumped to 80 after plunging 11 points in November.

While their economic and financial outlook improved, consumers did not expect inflation to be a threat.

The surveys' one-year inflation and five-year inflation gauge fell to 2.1 and 2.6 in early December. They ended at 2.7 and 3.0, respectively in November.