But failure to keep payroll tax cut could reverse gains
By Greg Robb, MarketWatch
WASHINGTON (MarketWatch) — Consumer sentiment stayed on an upswing, improving for the fourth straight month, according to data released Thursday from the University of Michigan and Thomson Reuters.
A gauge of consumer sentiment hit 69.9 in the final reading for December compared with 64.1 in November. A preliminary reading for December pegged the gauge at 67.7.
Economists polled by MarketWatch had expected a final December result of 68.7, with consumers somewhat cheered by lower gas prices and the drop in initial jobless claims.
Richard Curtin, the chief economist for the sentiment survey, cautioned that a failure by Congress to extend the payroll tax cut “would easily reverse the recent gains” in sentiment.
Republicans and Democrats in Congress continue to talk past each other on the tax cut on Thursday, making it more likely there will be a tax increase for 160 million workers on Jan. 1.
Despite the improvement, sentiment remains at historically low levels. Last year, the index stood at 74.5.
The sentiment gauge, which covers how consumers view their personal finances as well as business and buying conditions, averaged about 87 in the year before the start of the most recent recession. Economists watch sentiment data to get a feel for the direction of consumer spending.
Feast of data
Stocks were higher Thursday as the market digested a feast of economic indicators. The Dow Jones Industrial Average DJIA +0.29% was recently up 42 points at 12,148.
A report from the government on Thursday showed the number of Americans filing initial claims for regular state unemployment-insurance benefits fell 4,000 to a seasonally adjusted 364,000 in the week ended Dec. 17, the lowest level since April 2008.
The government also reported that U.S. economic growth in the third quarter was a little bit weaker than previously forecast, mainly because consumers spent less money on health care. The largest global economy grew at a 1.8% real annual pace in the July-through-September quarter, compared with the 2.0% estimated expansion reported last month.
Also, the Conference Board said that its index of leading economic indicators grew 0.5% in November.
Finally, the Federal Housing Agency said home prices fell 0.2% in October.
Details
Consumers’ views on current conditions and their expectations rose in December, according to Thursday’s sentiment data. The current-conditions gauge rose to 79.6 in December from 77.6 in November. Last year gauge was at 85.3.
The expectations barometer increased to 63.6 in December from 55.4 in November. Last year the barometer was at 67.5.
