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In November, consumer confidence levels increased for the first time in three months, reflecting a slowdown in job losses and increased consumer spending. While the unemployment rate is expected to exceed 10% for the first half of 2010, job cuts are expected to continue slowing and retailers are seeing increased spring orders - reflecting a more optimistic forecast for 2010. For more on this, see the following article from Money Morning.

consumer confidence
The Reuters/University of Michigan preliminary index of consumer confidence increased in November for the first time in three months as the pace of job cuts slowed and shoppers increased retail sales.

The index of consumer sentiment unexpectedly rose to 73.4, much higher than economists had forecast, from 67.4 in November, according to the report released Friday.  The December figure exceeds the average of 65 for the first nine months of the year.

Separately, U.S. retail sales rose 1.3% in November, the Commerce Department said Friday.  The figure was almost twice as much as the 0.7% increase Wall Street had expected.

Improved sentiment may have helped spending as the numbers suggest consumers were buying aggressively during the crucial holiday shopping season, helping to sustain a fragile economic recovery entering 2010.

“Consumers are clearly showing some willingness to spend,” Avery Shenfeld, chief economist at CIBC World Markets in Toronto told Bloomberg News. The rise in confidence is “consistent with the modest improvement we’ve seen in the pace of layoffs and the payrolls data.”

Economists surveyed by Bloomberg had forecast the consumer sentiment index to rise to 68.8.  The index averaged 89.2 during the economic expansion that began in late 2001 and ended in December 2007.

The final December figure is scheduled to be released on Dec. 23.

The positive reports came as most economists are projecting that surging unemployment will cripple consumer spending and stifle the economic rebound as the U.S. economy struggles to emerge from the worst recession since the 1930s. Consumer spending accounts for 70% of all U.S. economic activity

"The labor market is showing signs of stabilization, and this is giving consumers greater confidence to spend a little more than they were earlier this year," Chris Rupkey, chief financial economist at The Bank of Tokyo-Mitsubishi UFJ Ltd. in New York told MSNBC.com.

Even though economists are predicting that the unemployment rate will continue to exceed 10% for the first half of 2010, the pace of job cuts has slowed.  Initial jobless claims have remained below 500,000 for the last three weeks after peaking at almost 700,000 in late March.

U.S. President Barack Obama is rallying bipartisan support for a new stimulus package - estimated to be up to $170 billion - to help spur employers to increase hiring, including tax credits for small businesses and infrastructure projects.

Hong Kong-based Li & Fung Ltd. (PINK: LFUGF), the biggest supplier to Wal-Mart Stores Inc. (NYSE: WMT), said demand from Kohl’s Corp. (NYSE: KSS) and other “mid-tier” retailers is rebounding.

“The last few weeks, as we’re going into Christmas, most retailers have felt positive” and have increased orders for spring, Bruce Rockowitz, president of Li & Fung, told Bloomberg.

U.S. auto sales also picked up, increasing to a 10.92 million annual rate in November from 10.45 million a month earlier, industry data showed. General Motors Co. (NYSE: GRM), Toyota Motor Corp. (NYSE ADR: TM), Ford Motor Co. (NYSE: F) and Chrysler Group LLC all reported results that beat analysts’ estimates.

This article has been republished from Money Morning. You can also view this article at
Money Morning, an investment news and analysis site.