Consumer confidence is soft

NEW YORK - The nation's consumers grew slightly more confident in December despite underlying concerns about the health of the economy.

The Conference Board said yesterday that its Consumer Confidence Index advanced nationally to 88.6 in December from a revised 87.8 in November. While the gain was small, it was the first increase since July.

Wall Street forecasters had expected a slight drop to a reading of 87.0, according to Thomson/IFR. Analysts surveyed by Yahoo Finance had projected an 87.5 showing.

The increase, however, was not felt everywhere: The index fell in four of the nine regions into which the group splits the nation, including the Mid-Atlantic states of Pennsylvania, New Jersey and New York.

Lynn Franco, director of the Conference Board Consumer Research Center, said in a statement that the gain in the overall index "was due solely to an increase in the expectations index."

This reading - one of the two parts to the index - measures consumers' outlook over the next six months, and it rose to 75.5 in December from 69.1 the month before.

"Consumers' short-term outlook regarding business conditions, employment, inflation and stock prices improved marginally," Franco said.

Still, she added, "persistent declines in the Present Situation Index indicate the economy is still losing momentum."

That part of the index, which measures how consumers feel now about the economy, has been weakening since July and fell again in December to 108.3 from 115.7 the month before.

This reflects growing pessimism about the job market - a key contributor to consumer confidence and consumer spending.

In fact, a growing number of those surveyed said jobs were hard to get and fewer people said jobs were plentiful, Franco said.

Confidence levels are watched closely because they can presage changes in spending patterns; consumer spending makes up about two-thirds of the U.S. economy. Some economists question whether confidence surveys really predict how much consumers will spend in coming months. A declining index, they say, may simply reflect economic concern by consumers - but does not necessarily portend a cut in spending.

Even so, the monthly report from the Conference Board is widely watched.

Mark Vitner, senior economist with Wachovia Corp., of Charlotte, N.C., said yesterday's durable-goods and consumer-confidence reports were "consistent with a weak economy, but not a recession."

He predicted anemic economic growth through the first half of 2008, followed by expansion at a 2.5 percent annual rate. By comparison, growth in the 2007 third quarter was 4.9 percent.

Consumers, Vitner said, probably are reacting mainly to the slowing job market. The rise in jobless claims, reflecting deterioration in employment, "is what consumers are sensing," Vitner said.

The Conference Board survey, which measures a sample of about 5,000 U.S. households, collected its data before Dec. 18.