EDITORS: A taped replay of a Dec. 21 news conference with U-M economist Richard Curtin is available from 4:30 p.m. EST to midnight Jan. 4, 2002. Call (800) 475-6701, then punch in the following access code: 616977.

ANN ARBOR—Consumer confidence posted a sizable gain in December, marking the third consecutive monthly improvement since the September low. “While eight-in-ten consumers still think the economy is in recession, and record numbers reported hearing of recent layoffs, consumers increasingly expected the overall economy to post small gains in the year ahead,” according to Richard Curtin, the director of the University of Michigan’s Surveys of Consumers in the Institute for Social Research. “While consumers have not adopted an optimistic view, they have significantly reduced their level of pessimism about future economic prospects,” added Curtin.

The Index of Consumer Sentiment was 88.8 in the December survey, up from 83. 9 in the November survey and 81.8 in September, but well below last December’s 98.4. The Index of Consumer Expectations, a closely watched component of the Index of Leading Economic Indicators, was 82.3 in December, up from 76.6 in November and 73.5 in September, but well below last December’s reading of 90.7.

Half of all consumers reported hearing of recent layoffs and 80 percent reported that the economy was still in decline in both the November and December surveys. “Despite these concerns with current economic conditions, consumers were more likely to expect the economy to improve during the year ahead, and less likely to expect continued increases in unemployment,” Curtin said. The economic gains consumers anticipated were quite small. “Half of all consumers still expected bad times for the economy during 2002, and half expected continued increases in unemployment, but both figures were about 10 percentage points lower than three months ago,” explained Curtin.

“The good news is that the overall level of pessimism among consumers has declined, the bad news is that consumers expect the pace of economic growth to be so slow that it will not significantly improve economic conditions during the year ahead,” Curtin said.

Low inflation and low interest rates have helped to improve consumers views of their personal financial prospects as well as buying conditions. “While consumers still view their current financial situation quite negatively, their outlook for the year ahead has improved due to the expectation of somewhat larger income gains and a low inflation rate,” Curtin explained.

Consumers anticipated income gains of 2.9 precent during 2002, the highest level recorded in six months. For the year ahead, consumers expected an inflation rate of 1.8 precent in December.

Home buying attitudes improved in December as did consumers views of buying conditions for appliances, furniture, home electronics, and other household durables. Buying conditions for vehicles, however, have begun to recede from record levels as a reaction to the end of the zero interest rate incentives. “Consumers expect deep discounts of a wide range of products, and will be more willing to wait for sizable discounts after the start of the new year,” Curtin added.

Surveys of Consumers