The nation's consumers grew slightly more confident in December despite underlying concerns about the health of the U.S. economy.
The New York-based Conference Board said Thursday that its Consumer Confidence Index advanced to 88.6 in December from a revised 87.8 in November. It was the first increase since July.
Wall Street expected a slight drop to a reading of 87.0, according to Thomson/IFR. Analysts surveyed by Yahoo Finance had projected a stronger 87.5 showing.
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, which measures consumers' outlook over the next six months, 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 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 say jobs are hard to get and fewer say jobs are plentiful, Franco said.
Confidence levels are watching closely because they can presage changes in spending patterns; consumer spending makes up about two-thirds of the U.S. economy.
Stocks fell in Thursday trading after the assassination of Pakistani opposition leader Benazir Bhutto and after the Commerce Department reported a weak increase in durable goods orders. In late morning, the Dow Jones industrial average was down 102.34, or 0.8 percent, at 13,449.35. The Nasdaq composite and Standard & Poor's 500 indexes also were down.
Mark Vitner, senior economist with Wachovia Corp. in Charlotte, N.C., said the latest durable goods and consumer confidence reports were "consistent with a weak economy, but not a recession."
He predicts anemic economic growth through the first half of 2008, followed by expansion at a 2.5 percent annual rate.
Consumers, he said, are probably 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 some 5,000 U.S. households, collected its data prior to Dec. 18.
Many retailers reported mediocre Christmas traffic. The International Council of Shopping Centers said Wednesday that same-store sales, or sales at stores open at least a year, were coming in just below already slim projections for a 2.5 percent gain. Still, the trade group said a post-Christmas buying splurge could erase that shortfall.
