Consumer confidence rose sharply in December following three months of dramatic decline, posted its biggest gain in nearly four years as Americans wound down a grim year of war and recession with hopes for an economic rebound in 2002.

The Conference Board, a New York-based private research group, said on Friday its index of consumer confidence surged to 93.7 in December and revised up its November reading to 84.9 from a seven-year low of 82.2.

The surge was far above the 83.8 reading forecast by economists in a Reuters survey and the single-month gain was the largest since early 1998.

The group's index, based on a monthly survey of some 5,000 U.S. households, is closely watched because consumer confidence drives consumer spending, which accounts for about two-thirds of the nation's economic activity.

"The deterioration in economic conditions appears to be reaching a plateau, let by a stabilizing employment scenario," said Lynn Franco, director of the Conference Board's Consumer Research Center.

The increase, she said, suggested that an economic recovery is possible by the middle of next year and that the worst of the downturn may be over.

"Consumers' short-term optimism is no longer at recession levels, and the upward trend signals that the economy may be close to bottoming out and that a rebound by mid-2002 is likely," she said.

The improvement follows a fourth-quarter rally in the U.S. stock market, relative success by U.S.-led forces in the war in Afghanistan, and signs that the pace of job losses is easing somewhat.

"I'm pretty encouraged by the confidence numbers," said Gary Thayer, chief U.S. economist at A.G. Edwards and Sons in St. Louis. "That bodes well for the future."

The report gave U.S. stocks a boost and lifted the dollar against the yen. U.S. Treasury prices fell, pushing their yields higher, as bond investors bet an economic recovery may bring the Federal Reserve's aggressive interest rate cutting cycle to an end.

The Conference Board said 17 percent of consumers surveyed rated the economy's present state as "good," up from 16.8 percent in November, but noted that those who viewed business conditions remain "bad" rose to 21.7 percent from 20.7 percent.

Those rating jobs as plentiful edged up to 17.6 percent from 17.5 percent, while Americans saying jobs were hard to get dipped to 21.8 percent from 22.7 percent.

The Conference Board's Present Situation Index, which measures Americans' views of the economy right now, edged up to 96.9 in December from 96.2 in November.

And optimism that better times lie ahead in the coming six months helped propel the Expectations Index to 91.5 from 77.3 in November.

Reuters and the Associates Press contributed to this report.