Consumer confidence improved in December to its best level in six months and its second highest level since the start of 2008, according to the latest Reuters/University of Michigan Surveys of Consumers.
The gain was due to improved employment expectations that made consumers more willing to spend and adopt more favorable prospects for the overall economy. Consumers reported much more favorable news about recent changes in the job situation, and more frequently expected the unemployment rate to decline during the year ahead, according to the survey.
Lessening job uncertainty pushed buying plans for household durables to their highest level in three years. While holiday sales benefited from the improvements recorded in the past two months, combined with the recent passage of the tax legislation, consumer spending can be expected to increase in 2011.
“The worst of the unemployment numbers are behind us, and housing prices appear to have stabilized,” says Bryan Sadoff of Milwaukee-based Sadoff Investment Management. “That being said, even though the Great Recession is behind us, it doesn’t necessarily make for a great recovery.”
Personal Finances Remain Dismal
Sadoff’s comments reflect the survey’s findings, as consumers’ views of their financial situations have remained negative due to the widespread expectation of stagnant incomes. The current state of consumers’ financial situations remains grim. Just 23% reported recent gains in their finances, unchanged from last December, as twice as many consumers reported income declines as income advances. Just one-in-four consumers expected their finances to improve in the year ahead, which has remained unchanged for the past six months.