NEW YORK – U.S. consumer sentiment rose for a second month in early December as Americans shrugged off a spike in joblessness in November and took heart that the struggling economy and stock market may be stabilizing.
The improvement in sentiment, which topped analysts' expectations, is a good omen for the crucial holiday shopping season, which runs through the end of December.
The rise may also boost optimism that consumer spending, which drives two-thirds of the U.S. economy, will stay strong. But analysts cautioned a still-weak job market and the specter of a U.S. war on Iraq could weigh on future confidence.
"This is good news, coming at the best of possible times for retailers," said Christopher Low, chief economist at securities firm FTN Financial in New York. "Consumers are already spending more than they did late in the third quarter, especially on things other than autos, and this report suggests further improvement in the last month of the quarter."
The University of Michigan's preliminary December consumer sentiment index rose to 87.0 from a final reading of 84.2 in November, market sources who have seen the report said Friday. That was above consensus forecasts for a rise to 85.0.
The current conditions index, which correlates most closely with spending, rose to 95.9 in early December from 93.1 in November. The expectations index, which tracks attitudes about the 12 months ahead, rose to a preliminary 81.2 from 78.5.
U.S. Treasuries fell after the data were released while stocks, which traded broadly lower, only cheered the news briefly before resuming their decline. The dollar, also lower against major currencies, reacted little to the report.
The government said this week retail sales excluding automobiles held up in November and many are now hoping for a modest improvement in holiday sales compared with last year. If sentiment holds steady or improves further, that could help.
"The current reading of confidence, if sustained, is likely to be at a level that is consistent with some modest consumption growth," said Ian Morris, chief economist at HSBC Securities (USA).
The preliminary University of Michigan consumer sentiment survey is based on telephone interviews with about 300 Americans across the country on personal finances, business and buying conditions.
The data, rounded out to 500 calls at month's end, are released directly to subscribers only and are obtained through market sources.