U.S. Confidence in Economy Declines in Early December (Gallup)

Consumers are no more optimistic about

the U.S. economy in early December 2010

than they were at this time a year ago.

(Don't share with Wall Street as they have a really good gig

going with their sugar daddy, Ben Bernanke)

Gallup
by Dennis Jacobs
Chief Economist
12/14/10

PRINCETON, NJ -- Economic confidence is deteriorating sharply at the worst possible time for the nation's retailers. Gallup's Economic Confidence Index averaged -31 over the first two weeks of December, fully offsetting November's improvement, and essentially matching the monthly readings of -29 in October and -33 in September.

Consumers are no more optimistic about the U.S. economy in early December 2010 than they were at this time a year ago.

The Economic Confidence Index consists of two sets of ratings: one involving U.S. consumers' perceptions of current economic conditions and the other involving their economic outlook. The December estimate is based on more than 5,000 interviews conducted during the two weeks ending Dec. 12, 2010.

Percentage Rating the Economy "Poor" Worsens
Across Income Groups

During the first two weeks of December, 45% of Americans rated current economic conditions "poor" -- wiping out the improvement to 41% in November, and essentially matching the 44% of October. Consumers' ratings of current economic conditions deteriorated about equally among upper-income consumers (those making $90,000 or more a year) as well as middle- and lower-income Americans (those making less than $90,000).

Americans of All Incomes Less Optimistic
About Economy's Direction

Right now, consumers' expectations for the economy are substantially worse across income groups than they were during November, with 61% now saying the economy is getting worse. During the first two weeks of December, 58% of upper-income Americans and 62% of middle- and lower-income consumers said economic conditions are "getting worse" -- a worsening from 53% and 57%, respectively, in November.

Americans' Economic Optimism
Fading in Early December

Gallup's Economic Confidence Index suggests that the sharp improvement in economic confidence seen in November may be dissipating at the worst possible time for the nation's retailers. The sour reactions of many to the Federal Reserve's efforts to pour money into the economy -- so-called quantitative easing -- may have negatively affected the economic outlook of some consumers and investors. That might also be the case with the financial difficulties in Europe. If so, the statement of the Federal Open Market Committee on Tuesday afternoon, and the reaction to it, could be more important than usual.

More likely, the government's early December report of a surprisingly high unemployment rate for November may have increased consumer worries not only about jobs but also the direction of the U.S. economy. This despite Gallup's tracking data suggesting this government report may be overstated -- at least as far as what is really taking place in the job market right now.

It also might be the case that some Americans who had hoped for increased political harmony after the midterm elections are disappointed about the current battle over the proposed extension of the Bush tax cuts and the extension of emergency unemployment insurance, particularly when so many Americans tend to support both efforts.

Regardless, consumer spending does not reflect an improving economy at this point. Add in the recent decline in economic confidence, and Christmas sales may not meet the increasing expectations that followed the success of Black Friday week.

Gallup will publish its final estimate of Christmas spending later this week. Link to complete Gallup Report