NEW YORK – U.S. consumer sentiment (search) rose in early December, according to a survey released on Friday, as consumers reacted positively to lower prices at the gas pump.
The University of Michigan's (search) preliminary reading of its consumer confidence index for December was 95.7, up from November's final reading of 92.8, according to market sources who saw the subscription-only report. Analysts on average had forecast that the index would edge up to 93.5.
The survey's index of current conditions gave a preliminary December reading of 106.8, up from a final November reading of 104.7. Its index of consumer expectations gave a preliminary December reading of 88.8, up from November's final reading of 85.2, market sources said.
"People have reacted to the fact that oil prices have come down and that means they expect things to get better going forward," said Jay Bryson, global economist at Wachovia Corp (WB). "The current conditions index shows that people recognize the economy has picked up some steam."
David Berson, chief economist at Fannie Mae (FNM) , said consumer confidence went down a lot in October and November when oil prices spiked. The bounce in sentiment in early December was probably due to the fact that oil prices were lower, he said.
Financial markets registered little reaction to the report and economists, also, tended to minimize its significance.
"It's not like Fed policy is going to be dictated by this number," Bryson said.
Richard DeKaser, chief economist at National City Corp., said the December results looked like a relatively upbeat month for consumers, but that the month-to-month changes this year had been slight.
The index rose significantly from November, but even so, remains below the three-month average ended in August, said John Lonsky, chief economist at Moody's Investors Service (search).
"Consumer sentiment moved in the right direction in December but is still short of the 2004 high," Lonski said. "The December reading was consistent with modest additions to payrolls, but a sub par rate of growth for employment."
Consumer confidence is considered a barometer of consumer spending, which accounts for two-thirds of the U.S. economy, although the correlation between confidence and retail sales has not been strong in recent years.