Buyers Still Wary Despite Strong Sales For Holidays

December 28, 2010

NPR Staff and Wires

(Getty/Jeff J. Mitchell)

American consumers sent out decidedly contradictory signals Tuesday, spending more in December while telling researchers they were less confident about the economy.

After showing a slight improvement in November, the Conference Board's index of consumer confidence dropped to 52.5 in December. That's down from 54.3 the month before. A reading of 90 or above indicates a healthy economy.

Analysts had expected the index to rise to 55.8 in an indication that confidence was on the mend after the longest and deepest economic downturn since the 1930s. That would have been in line with a strong 5.5 percent jump in holiday sales that rose to $584 billion from Nov. 5 through Dec. 24, according to MasterCard Advisors' SpendingPulse -- the best showing since 2005, well before the recession.

MasterCard said there had been sizable increases in spending on apparel, jewelry and luxury items over the holiday shopping season.

"Today's report indicates that consumers are still in a fragile state and confidence remains at depressed levels despite strong holiday retail sales, low prices, and a relatively robust stock market," said Chris Christopher Jr., senior principal economist at HIS Global Insight. "The poor housing market performance, high gasoline prices and a lackluster job market are keeping consumers in a tepid mood."

The Conference Board, a private research group, played down the significance of the weaker-than-expected consumer confidence report.

"Consumer confidence is no worse off today than it was a year ago," said Lynn Franco, director of the Consumer Research Center at the Conference Board.

"Consumers' assessment of the current state of the economy and labor market remains tepid, and their outlook remains cautious," she said. "All signs continue to suggest that the economic expansion will continue well into 2011, but that the pace of growth will remain moderate."

The percentage of people who said jobs were "plentiful" decreased to 3.9 percent from 4.3 percent, while those stating jobs are "hard to get" edged up to 46.8 percent from 46.3 percent.

Those expecting an improvement in business conditions over the next six months edged up to 16.6 percent from 16.4 percent, while those anticipating business conditions will worsen edged down to 12.1 percent from 12.4 percent.

"Employment continues to be a large drag on consumer confidence and I think until we see a substantial turnaround there, we're not likely to see very high confidence levels," Franco said.

The confidence report helped push stocks lower on some world markets on Tuesday, although the response was muted owing to its contrast with other recent U.S. economic data, especially after the agreement between the White House and Republicans in Congress to extend Bush-era tax cuts.

"Everybody has done what they need to do. The money that has been put in place has been put in place until the end of the year -- in spite of the fact we may get some modestly surprising data," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, N.J. Copyright 2010 National Public Radio.