Ahead of the Bell: Consumer confidence

By ANNE D'INNOCENZIO

posted: 14 DAYS 20 HOURS AGO

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NEW YORK -A preliminary report on consumer confidence Tuesday is expected to show a third straight month of improvement but an overall gloomy mood in January.

Economists surveyed by Thomson Reuters predict the Consumer Confidence Index — due out from the business group the Conference Board at 10 a.m. EST — will rise to 53.5 from 52.9 in December.

That figure would still be a long way from what's considered healthy: A reading above 90 means the economy is on solid footing. Above 100 signals strong growth.

The index hit a historic low of 25.3 in February 2009 but then enjoyed a three-month climb to 54.8 in May, fueled by signs the economy might be stabilizing. Since then, it has been mired in a narrow range, dropping as low as 47, as rising unemployment took a toll.

The expected reading of 53.5 for January would be below the 61.4 figure in September 2008, when the financial crisis intensified with the collapse of Lehman Brothers.

Economists watch the confidence numbers closely because consumer spending on goods and services, including health care and other major expenses, accounts for about 70 percent of U.S. economic activity as measured by the federal government.

As measured by the gross domestic product, the economy grew at an annual rate of 2.2 percent in July through September compared with a year earlier. That rise came after four quarters of decreases and was the strongest sign to date that the recession, which started in December 2007, has ended.

Economists expect the Commerce Department GDP figure, to be released Friday, to show even faster growth in October through December. But continued high unemployment could lead consumers to further cut their spending, and that could dampen GDP growth.

And stores saw better-than-expected sales gains in November and December compared with a year earlier, when they declined sharply from 2007, according to various measures.

Many economists expect new jobs to be created in coming months, but they still worry that unemployment will climb further, perhaps as high as 10.5 percent by next summer. The economy continued to lose jobs in December, when the total dropped by 85,000, the Labor Department said this month.

Analysts will be studying fourth-quarter earnings reports this month and next from major retailers including Wal-Mart Stores Inc., the world's largest, to assess consumers' financial health.

"We are seeing pretty good signs that shoppers are coming out of the doldrums," said Frank Badillo, senior economist at Retail Forward. But he said their spending won't last without a turnaround in the job market.

2010-01-26 06:24:10