U.S. consumer confidence rose more than forecast in December, reaching a five-month high and reflecting increased optimism about jobs and incomes that brightens the economic outlook.
The Conference Board’s reading of 102.3 exceeded the highest estimate in a Bloomberg News survey of economists and followed a revised 92.6 in November that was stronger than first reported. Optimism about the economy in the next six months increased the most since May of last year and views on current conditions also improved.
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“The whole tone of the economic conversation is more upbeat,” Chris Low, chief economist at FTN Financial in New York, said before the report.
The Standard & Poor’s index of 500 stocks closed last week at its highest level since August 2001, and gasoline prices fell to their lowest since April, giving people more money to spend. Amazon.com Inc., the world’s largest Internet retailer, said Monday it had a single-day record number of orders.
Economists forecast the New York-based research group’s index to rise to 94, according to the median of 51 estimates in the Bloomberg survey. Estimates ranged from 91.7 to 98. The Conference Board surveyed 5,000 households about general economic conditions, employment prospects and spending plans.
The index of consumer expectations for the next six months rose to 99.9 from 90.2 in November, marking the biggest increase since President George W. Bush declared an end to major combat missions in Iraq in May 2003. Optimism about the present situation increased to 105.9 from 96.3.
Retailers
Tuesday’s figures follow the release last week of the University of Michigan’s consumer sentiment index, which rose to 97.1 this month, the highest level since January. Sentiment among those surveyed by the university was bolstered by increased job prospects, higher stock prices and lower energy prices.
Sales at the nation’s retailers surged in the final days before Christmas, rising 4.3 percent in the week that ended Dec. 25 compared with a year earlier, according to the New York-based International Council of Shopping Centers-UBS weekly index.
“The number of transactions we ring in our stores each day for most of this month have been up substantially over the prior year,” Eugene Dunkin, president of Godiva Chocolatier North America, said in an interview last week. “It looks like it’s frankly a healthy combination of more people coming into the store and now we’re seeing the size of the transaction is growing as well.”
Employment, Incomes
The percentage of people in the Conference Board’s survey who see jobs as hard to get dropped to 26.4 from 28 in November, and those seeing jobs as “plentiful” rose to 19.4 from 17.1.
Americans see incomes improving. The percentage of people expecting an increase over the next six months rose to 20.7 this month, the highest in a year, from 19.2. Those expecting a decrease dropped to 8.6 from 10.6.
The U.S. economy grew at a 4 percent annual rate in the third quarter, faster than previously estimated and boosted by the strongest pace of consumer spending in almost three years, the Commerce Department said last week. Consumer purchases will be augmented by business investment in new equipment next year, economists forecast.
Gross domestic product, the sum of all goods and services produced in the U.S., will probably rise 3.6 percent next year, according to the latest survey of economists from Dec. 1 to Dec. 8. This year, the economy will probably grow 4.4 percent.
Stocks
The S&P 500 index closed at 1210.13 last week, the highest since August 2001, and has increased almost 9 percent so far this year.
“Everything really is improving,” said Tim Rogers, chief economist at Briefing.com in Boston. “Labor demand certainly has improved over the last several months.”
Employers added 112,000 workers to their payrolls in November after 303,000 a month earlier, the latest Labor Department data show. That’s the best two months of job growth since April and May. Another 175,000 were probably added this month, according to a Bloomberg survey.
Buying plans improved across the board. The percentage of people who said they’d buy a car in the next six months increased to 6.4 percent from 4.6 percent in November. Those saying they’d buy a house rose to 3.4 percent from 2.6 percent and the percentage planning to buy a major appliance increased to 29.3 from 25.3.
Spending
Spending by consumers rose in November for a fifth month. The 0.2 percent gain followed a 0.8 percent increase in October, the Commerce Department said last week in Washington. Incomes rose 0.3 percent last month, after rising 0.6 percent in October.
The link between confidence and consumer spending isn’t always direct, economists said. Consumer spending, which accounts for two-thirds of the economy, helped propel growth last year at the same time confidence waned because mortgage refinancing and tax breaks put more money in Americans’ wallets.
Amazon.com said Monday that holiday sales set a record on brisk sales of electronics and books. Demand for Apple Computer Inc.’s 20-gigabyte iPod music player was so strong that Amazon.com ran out of them. DVD players and digital cameras were among the company’s best sellers.
Retail sales may stay just as strong in coming months. Holiday gift-card sales probably rose to more than $20 billion, topping forecasts. Gift cards aren’t counted as sales until they’re used for purchases. They may have accounted for 11 percent of holiday spending, according to the New York-based International Council of Shopping Centers.
Lower gasoline prices helped consumers. The average price of a gallon of gasoline was $1.86 in the week that ended Dec. 20, down from $1.89 a week earlier and the lowest since April 26, according to Department of Energy statistics.
– Bloomberg News
