Consumer Sentiment Improves By Much More Than Expected In December

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Consumer sentiment has improved by much more than anticipated in the month of December, according to the preliminary reading on the Reuters/University of Michigan's consumer sentiment index, with the data released on Friday adding to the optimism generated by better than expected retail sales data.

Reuters and the UofM said their consumer sentiment index jumped to a reading of 73.4 in December from a final reading of 67.4 in November. Economists had been expecting a much more modest increase by the index to a reading of 68.8.

The much bigger than expected increase by the index was largely due to an improvement of consumers' assessment of current conditions, with the current conditions index jumping to 79.1 in December from 68.8 in November. With the increase, the index rose to its highest level since March of 2008.

Consumers were also somewhat more optimistic about the outlook for the economy, with the economic outlook index rising to 69.7 in December from 66.5 in the previous month. The increase lifted the index to its best reading since September.

The report also showed that one-year inflation expectations fell to 2.1 percent in December from 2.7 percent in November, falling to their lowest reading since March.

"Interestingly though, the exact same thing happened in December 2008 as inflation expectations fell from 2.9 percent to 1.7 percent only to rise in subsequent months," said Peter Boockvar, equity strategist for Miller Tabak.

Boockvar added, "Also last December, consumer confidence jumped 5 points from November as the holiday season seemed to have helped to improve psychology this year and last in light of a tough economy. Hopefully this time around it lasts into 2010."

As mentioned above, the better than expected reading on consumer sentiment may add to the optimism about the holiday shopping season generated by a report from the Commerce Department showing stronger than expected retail sales growth in November.

The report showed that retail sales jumped by 1.3 percent in November following a revised 1.1 percent increase in October. Economists had been expecting sales to increase by a more modest 0.6 percent compared to the 1.4 percent growth originally reported for the previous month.

With the stronger than expected monthly sales growth, retail sales for November were up by 1.9 percent compared to the same month a year ago.

Consumer sentiment has improved by much more than anticipated in the month of December, according to the preliminary reading on the Reuters/University of Michigan's consumer sentiment index, with the data released on Friday adding to the optimism generated by better than expected retail sales data. Reuters and the UofM said their consumer sentiment index jumped to a reading of 73.4 in December from a final reading of 67.4 in November. Economists had been expecting a much more modest increase. (Market News Provided by RTTNews)