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Portfolio > Economy & Markets

Consumer Confidence Still Shaky in December

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It was a mixed bag of consumer confidence news Tuesday to round out 2010. 

The State Street Investor Confidence Index rose 8 points from 96.4 to 104.4 in December 2010, State Street Global Markets reported Tuesday.

Investors were more confident in North America and Asia, where the index rose 7.7 points and 7.4 points respectively. In Europe, the Index fell 10.8 points to 99.

“The strong decline of European investors’ confidence shows that the regions’ investors remain quite jittery in the face of intra-European turmoil,” Paul O’Connell of State Street Associates, and one of the developers of the Index, said in a press release. “We went quickly from a regime of concern around the euro and the liquidity of some of the smaller countries’ debts, to a regime where those concerns were ignored. And now we have come full circle: European investors are back again worrying that high sovereign indebtedness may prove destabilizing for the region.”

The Index measures institutional investors buying and selling patterns to determine confidence levels. An Index level of 100 shows investors are "neutral," and are not increasing or decreasing their allocations to risky assets.

The Conference Board, however, found consumers were less confident in December. Results from the Consumer Confidence Index, released Tuesday, found that after gaining slightly in November, investors' confidence was down slightly in December, dropping to 52.5 from 54.3 last month.

The Index found investors were more pessimistic about their present-day conditions in December than they were in November. The Present Situation Index fell to 23.5 from 25.4. Just 7.5% of consumers say business is "good," and 41.2% of consumers say business is actually "bad." Over 46% say jobs are difficult to come by.

The December Expectations Index found investors aren't optimistic about the future, either, dropping to 71.9 from 73.6 in November. The percentage of consumers who expect improvement over the next six months increased slightly to 16.6%, but 19.5% say expect fewer job opportunities in the future. Less than 10% of consumers expect an increase in their incomes.

Lynn Franco, director of the Consumer Research Center at The Conference Board, noted in a press release that while down in December, "consumer confidence is no worse off than it was a year ago."

"Consumers' assessment of the current state of the economy and labor market remains tepid, and their outlook remains cautious," she added. "Thus, all signs continue to suggest that the economic expansion will continue well into 2011, but that the pace of growth will remain moderate."

Results from a Harris Poll released Monday confirmed investors' falling confidence. Forty-two percent of respondents said they feel less financially secure now than they did a year ago, and 26% say the economy will get worse in the next 12 months.

Sixty-three percent of respondents rated their regional job market as bad, and 22% say it will get worse.

Almost half of investors say they will cut back on spending in 2011 (49%). Twenty-two percent said they would get rid of at least one of their credit cards, and 41% say they will pay down debt. Forty percent of respondents say they will save more, but just 22% said they would save more for retirement.

Few respondents reported making changes to their portfolios. Just 8% said they will invest in less risky investments in 2011. Furthermore, 18% of respondents said they don't expect to do anything differently in 2011.


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