U.S. December Consumer Confidence Increases, Slow Growth Expected
Dec 29, 2004
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U.S. consumer confidence posted a strong gain in the December 2004 survey as consumers were more positive about overall economic prospects for the year ahead, according to the University of Michigan's (Ann Arbor, MI, U.S.) report, Surveys of Consumers.

“While consumers expect some improvement during the year ahead, they anticipate only modest increases in employment during 2005,” said Richard Curtin, director of the U-M's Surveys of Consumers. According to Mr. Curtin, rather than indicating the start of a new upward surge in confidence, the December data simply confirms that confidence has remained largely unchanged at positive levels for the entire year.

The Index of Consumer Sentiment was 97.1 in the December 2004 survey, up from 92.8 in November, and the 92.6 recorded last December. During 2004, the Sentiment Index averaged 95.2, and showed only small month-to-month variations. The Expectations Index, a closely watched component of the Index of Leading Economic Indicators, was 90.9 in December, up from 85.2 in November, and just ahead last year's 89.8.

The report indicates there is wide agreement among consumers that the end of the housing boom is near. “While fewer and fewer consumers judged current mortgage rates to be attractively low, more consumers thought it would be better to buy in advance of expected increases in interest rates and home prices,” Mr. Curtin said.

Overall, one-in-four consumers in the December 2004 emphasized the need to act before additional increases in interest rates and prices. Three-fourths of all consumers expected interest rates to increase during 2005.

“While more families expected good times financially in the economy as a whole, they nonetheless expected the pace of growth to be somewhat slower in 2005 than 2004,” explained Mr. Curtin. This expected slowdown in the rate of economic growth caused consumers to anticipate that the unemployment rate would not decline by very much during the year ahead.

The only area that did not show any improvement in the December survey was consumers' evaluations of their current finances. “Consumers did express greater optimism about their finances during the year ahead as they anticipated somewhat larger income gains and lower gas prices next year,” Mr. Curtin noted.

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