Conference Board: Consumer Confidence Rebounds

Consumer confidence rebounded in December to a five-month high as job growth and economic expansion buoyed consumers' spirits, the Conference Board (search) said Tuesday.

The Conference Board's consumer confidence index (search) jumped to 102.3 from a revised 92.6 in November as consumers' satisfaction with both the current state of the economy and prospects for next year improved, the private business group said Tuesday.

The index surpassed economists' forecasts of a 94.6 December reading.

"The huge surprise on the upside is telling us that labor market conditions are probably better than perceived," said Anthony Chan, managing director and senior economist at JP Morgan Fleming Asset Management.

The Conference Board's Present Situation Index (search) rose to 105.9 in December from 96.3 in November. The Expectations Index jumped to 99.9 from 90.2 in November.

"The continuing economic expansion, combined with job growth, has consumers ending the year on a high note," said Lynn Franco, director of the Conference Board's consumer research center.

She said the most significant contributor to the rebound in confidence was the overall improvement in current conditions over the past 12 months.

"Consumers' outlook suggests that the economy will continue to expand in the first half of the new year," Franco added.

Consumers' assessment of current conditions was significantly more favorable than it was in November, with the portion of consumers asserting that business conditions were "good" increasing to 24.4 percent in December from 23.2 percent in November. The portion of consumers who said business conditions were "bad" fell to 17.8 percent from 20.2 percent.

Consumers also took a more upbeat view of their employment prospects, with those saying that jobs are "plentiful" increasing to 19.4 percent in December from 17.1 percent in November. Consumers who said jobs are "hard to get" declined to 26.4 percent from 28.0 percent.

Consumers' outlook for the next six months was more upbeat. Those expecting business conditions to improve rose to 22.0 percent in December from 20.3 percent in November. Those anticipating business conditions to worsen fell to 7.7 percent from 11.4 percent.

Consumers also adopted a rosier view of the labor market. Those expecting fewer jobs to become available in the coming months declined to 15.5 percent in December from 19.3 percent in November. But those who expected more jobs to become available eased to 16.2 percent in December from 17.6 percent in November.

One perception that could aid consumer spending, a mainstay of economic growth, was consumers' view that their incomes would improve in the months ahead. Consumers who took that view edged up to 20.7 percent in December from 19.2 percent in November.

U.S. Treasury debt prices, already lower before the report was released, subsequently slipped further, with the benchmark 10-year Treasury note yield, which moves in the opposite direction of price, rising to 4.34 percent.

"It's not good news for Treasuries," said Chan. "But it is good news for corporate spreads because it tells us the expansion is likely to continue unabated in 2005."

Chan said in light of expectations that the economy will continue to grow, the Federal Reserve (search) was likely to continue to raise rates for much of 2005.