Consumer spirits lift as the economic recovery accelerates

Confidence among U.S. consumers increased in December to a maximum of six months, coinciding with the strongest holiday sales showing that the economy is gaining speed.

The index of Thomson Reuters / University of Michigan preliminary consumer sentiment rose to 74.2 from 71.6 in late November. A Commerce Department report showed the U.S. trade deficit shrank more than expected in October of 38.7 billion U.S. dollars in the economies in export-led growth abroad to a maximum of two years.

Retailers such as Neiman Marcus Group Inc., have benefited during the year's biggest purchases, Americans grew more optimistic about the job market. Treasuries fell after the trade report said the U.S. economy is getting a boost from a jump in exports resulting from increasing demand in markets such as China, Brazil and South Korea.

"There is a wave of good news in this moment," said Jonathan Basile, an economist at Credit Suisse in New York. "That to me is a sign that households and businesses can make purchases with a little more confidence."

Economists expected a reading of 72.5 in December feeling, according to the median estimate in a survey. The survey forecast of 67 economists ranged from 69 to 76.5. The average indicator 89 in the five years preceding the recession that began in December 2007.

As the survey of current conditions, which reflects Americans' perceptions of their financial situation and whether it is a good time to buy expensive items like cars, rose to 85.7, the highest since January 2008, from 82 1 the previous month.

Consumer Expectations

consumer expectations for six months from now, which more closely projects the direction of consumer spending, rose to a six-month high of 66.8 from 64.8.

Stocks rallied, sending 500 of Standard & Poor's at the highest level since the week of bankruptcy Lehman Brothers Holdings Inc. s. The S & P 500 gained 0.6 percent to 1,240.4 at the close at 4 pm in New York. The yield on the benchmark 10-year Treasury, which moves inversely to price, rose to 3.33 percent from 3.21 percent late yesterday.

Higher stock prices this month in tax rates and the signs will be maintained can sustain the growing minds of Americans. Since late November, the S & P 500 gained 5.1 percent. President Barack Obama this week agreed with the Republicans to extend the income tax cuts introduced by President George W. Bush.

"Consumers are taking their keys to the stock market, and private employment is increasing, despite the disappointing numbers in November," said Ryan Sweet, senior economist at Moody's Analytics Inc. in West Chester, Pennsylvania, who designed the confidence index would rise to 74.

Holiday Forecast

The National Retail Federation predicts November-December sales rise by 2.3 percent from the same time in 2009, making it the holiday season the best stores in four years. The ICSC said it expects December sales to rise to 3.5 percent compared to last year.

"Usually I would say the main customer is absolutely new business," said Neiman Marcus CEO Karen Katz in a conference call on December 8. However, consumers' spending is not back up to levels before the recession and we have no expectation that they will get to that level. "

Michigan's survey showed that the purchase of plans durable household goods rose to the highest level since January 2008. The proportion of Americans saying they were hearing of job gains rose to its highest level since 1983.

November unemployment

The figure is at odds with the Labor Department last week showed unemployment in November rose to 9.8 percent, the highest since April, and close to a maximum of 26 years. The economy added 39,000 jobs after 172,000 the previous month.

The Commerce Department report showed that imports of trade stagnated in October as U.S. demand for crude oil fell. The overall trade deficit, which decreased by 13 percent, is expected to be little changed at 43.8 billion, according to the median forecast of economists surveyed. Estimates ranged from deficits of 39.5 billion U.S. dollars to 46.6 billion U.S. dollars.

"Trade is certainly going to provide a decent local growth in the fourth quarter," said Sweet.

Exports, benefiting from a cheaper dollar, increased 3.2 percent to 158.7 billion U.S. dollars, boosted by sales of food, cars, engines and industrial supplies such as fuel oil and natural gas.

Dollar

Since reaching a maximum of one year on 7 June, the dollar has fallen 6.6 percent against a trade-weighted basket of currencies. The decline makes American products cheaper for overseas buyers and keep encouraging the production, which was extended for a month straight in November sixteenth.

The weak dollar and increased demand from emerging markets have led to higher raw material costs, helping to explain why U.S. import prices rose in November by the most in a year. The Labor Department said today that prices paid for imported goods rose 1.3 percent.

Separate figures from the Treasury showed the U.S. government recorded a larger deficit in November as spending increased compared with the same period last year, when a change in the schedule of payments for programs such as Medicare and Social Security costs damped. The November deficit was 150.4 billion U.S. dollars, more than 120.3 billion U.S. dollars in the same month in 2009.