WASHINGTON (Reuters) - U.S. consumer confidence fell more than expected in December, hitting a four-month low as a looming fiscal crisis sapped what had been a growing sense of optimism about the economy.
The report heightened concerns that a failure by Washington to avert planned tax hikes and spending cuts could lead households to close their wallets, threatening an economic recovery that has been steady albeit lackluster.
Other data on Thursday highlighted the positive momentum building in the economy, with the number of Americans filing new claims for jobless benefits falling to a nearly 4-1/2 year low and new home sales hitting their highest level since April 2010.
But gauges of business sentiment have weakened recently on worries Washington will go forward with plans to slash the federal deficit by about $600 billion in 2013.
Now consumers also appear apprehensive, a sign worries about the so-called "fiscal cliff" could bite into household spending.
The Conference Board, an industry group, said its index of consumer attitudes fell to 65.1 from 71.5 in November.
A sub-index measuring how consumers feel about their present situation rose to its highest level in more than four years, but a gauge of sentiment about the future plunged to its lowest point in more than a year.
"Consumers are increasingly preoccupied with the potential damage the fiscal cliff will cause to the economy and to their wallets if a deal is not reached soon," economists at RBS in Stamford, Connecticut, wrote in a research note.
Separately, the Labor Department said initial claims for state unemployment benefits dropped 12,000 last week to a seasonally adjusted 350,000, the Labor Department said.
"This recent improvement in the claims data is potentially a favorable signal for the labor market," said Daniel Silver, an economist at JPMorgan in New York.
After spiking in the wake of a mammoth storm that ravaged the East Coast in late October, new claims have dropped to their lowest levels since the early days of the 2007-09 recession. The four-week moving average fell 11,250 last week to 356,750, the lowest since March 2008.
The claims data has no direct relation to the government's monthly employment report, but it suggests the surge in layoffs since the recession has at least run its course.
Still, many economists think hiring may remain sluggish even as the pace of layoffs ease.
Companies in recent months have been adding to their payrolls at a lackluster pace, and analysts expect the employment report due on January 4 will show 143,000 jobs were created in December, down from 146,000 in November.
"A significant improvement in labor market conditions ahead of any resolution to the fiscal cliff is unlikely," said Michael Gapen, an economist at Barclays in New York.
U.S. stocks opened flat but turned lower as the Senate Democratic leader derided Republicans for the lack of progress in budget talks and warned that a fall off the "cliff" appeared inevitable. Investors sought safety by buying U.S. Treasury debt and the dollar, which rose against the euro.
Following a truncated holiday break in Hawaii, U.S. President Barack Obama returned to Washington to restart talks to avoid the brunt of the fiscal cliff's impact, which would likely put the U.S. economy back into recession if not lessened.
HOLIDAY CAVEAT
The signs of progress in the claims data also included a caveat, at least for the latest week.
Obama declared Monday a holiday for federal workers and many state offices followed suit and were unable to provide complete data for last week's jobless claims. Data for 19 states was estimated, although 14 of those states submitted their own estimates, which tend to be fairly accurate.
The holiday season can make it more difficult to adjust the claims data for normal seasonal fluctuations, another reason to be cautious about the report for last week.
Separately, the Commerce Department said new U.S. single-family home sales rose in November to a 377,000-unit annual rate, while the median sales price jumped 14.9 percent from the same month in 2011, the latest signs the U.S. housing recovery is gaining some steam.
In a fourth report, the Chicago Federal Reserve Bank said its index of factory activity in the U.S. Midwest increased in November to 93.7 from a revised 92.2 in October.
(Reporting by Jason Lange; Additional reporting by Richard Leong and Ryan Vlastelica in New York; Editing by Neil Stempleman)
Consumer sentiment weakens as fiscal crisis looms
This article
Consumer sentiment weakens as fiscal crisis looms
can be opened in url
http://newssubnasal.blogspot.com/2012/12/consumer-sentiment-weakens-as-fiscal.html
Consumer sentiment weakens as fiscal crisis looms
