Consumer Confidence Up Less Than Expected

By:: Peter King | January 15, 2010

Consumer confidence in the economy edged up slightly in early January, but not nearly as much as economists had expected.

That’s according to the latest Reuters/University of Michigan Surveys of Consumers, released today. The preliminary index of consumer sentiment rose to 72.8, up from 72.5 in December. Economists had predicted an increase to around 74.0-75.0.

The small increase was attributed to worries over high unemployment and income, which countered other signs pointing to an improving economy. The index hit its lowest reading in 28 years in Nov. 2008, when it registered 55.3.

The survey’s measure of current economic conditions, which assesses consumer’s perceptions of their own finances and whether it’s a good time to make significant purchases, rose to an index of 81.0, up from 78.0 in December and exceeding economist’s predictions of 78.5. It’s the highest that reading has been since March 2008.

But a bumpy road is still expected ahead, as the index of consumer expectations for conditions six months from now fell to 67.5, from 68.9 last month and way short of the 70.3 predicted by economists. Looking 12 months ahead, however, the outlook was considerably better, as the consumer index for that period rose to 82, up from 79 in December.

"While consumers anticipated continuing gains in the overall economy, few consumers expected an immediate shift toward the type of positive developments that would improve their job and income prospects," said Richard Curtin, director of the surveys.

The survey also showed that consumers expect moderate inflation over the next year, with a rate of 2.8 percent, somewhat higher than government predictions, and up from 2.5 percent predicted in the December survey. Consumers in the survey expect that same 2.8 percent rate of inflation to persist over the next five years, up from 2.7 percent in January.

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