U.S. consumer sentiment surprisingly slips in Dec.

U.S. consumer sentiment surprisingly slips in Dec. Friday December 12, 9:58 am ET

NEW YORK, Dec 12 (Reuters) - U.S. consumers turned gloomier about the economy through mid-December even as the labor market shows some improvement and stocks have steadily risen, market sources said on Friday.

The University of Michigan's preliminary reading of consumer sentiment fell to 89.6 in December from November's final reading of 93.7, according to market sources who have seen the report. Economists had forecast a rise to 96.0.

The unexpected decline threw doubt on consumer spending during the holiday season, though measures of confidence have had little link to actual retail sales in recent years.

The current conditions index fell sharply, to 93.6 from 102.5 the prior month, while the expectations index slide to 87.1 from a final reading of 88.1 in November.

DJ Univ Michigan -2: Consumer Mood Sours In Mid-December

. By Michael S. Derby Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Consumers' moods soured strongly in the middle of December, as assessments of current conditions staged a big and unexpected retreat.

The University of Michigan's preliminary report on consumer sentiment for December was said to have shown a decrease to 89.6 from 93.7 in November, according to those who had seen the report Friday. The Michigan report is released only to subscribers.

The report was well below what economists had expected, and its decline was particularly surprising given the tenor of recent economic reports. Forecasters surveyed by Dow Jones Newswires and CNBC had expected to see a reading of 95.2 for mid-December.

The Michigan index on current conditions plummeted to 93.6 as of the middle of the month, from 102.5 in November and 99.9 in October. The research group's gauge of expectations, which seeks to assess consumers' longer-term views, was tame in comparison, moving to 87.1 in mid-December, after standing at 88.1 at the end of last month, and 83.0 in October.

(MORE) Dow Jones Newswires

12-12-03 1004ET- - 10 04 AM EST 12-12-03

U.S. Dec. Michigan Sentiment Index Unexpectedly Falls (Update1)
Dec. 12 (Bloomberg) -- U.S. consumer sentiment unexpectedly fell this month after two months of gains as the economy created fewer jobs than forecast in November, a sign Americans may still be concerned about job security.

The university's preliminary December consumer sentiment index fell to 89.6 from 93.7 in November, compared with the median forecast of a jump to 96 in a Bloomberg News survey. Last month's index was the highest in more than a year and a half.

``This is consistent with the fits and starts we're seeing in the recovery,'' said William Quan, director of research at Mizuho Securities USA Inc. in Hoboken, New Jersey. ``This recovery is not a moonshot like other recoveries. We're not going to go from 10 miles-per-hour to 100 miles-per-hour right away.''

The U.S. added 57,000 jobs in November, fewer than most economists had forecast, restrained by a grocery worker strike in California and 40 consecutive months of decreases in manufacturing positions. Business investment in new technology and supplies may take up the slack of slower growth in consumer spending this quarter, economists said.

Economists had forecast a reading of 96 in the index, the median of 54 estimates in a Bloomberg News survey. The Michigan preliminary index comes from a poll of about 250 households. A final index comprised of twice as many homes is released at the end of the month.

The current conditions index, which reflects perception of consumers' financial situation and whether it's a good time to make major purchases, fell to 93.6 this month, the lowest since May, from 102.5 in November. The expectations index, based on optimism about the next one to five years, fell a full percentage point to 87.1.

Market Reaction

Treasuries rose after the confidence report bolstered speculation the Federal Reserve will delay raising its benchmark interest rate. The 4 1/4 percent note maturing in November 2013 climbed more than 1/8, or $1.25 per $1,000 face amount, to 100 10/32 by 9:54 a.m., according to Bear Stearns & Co. Its yield fell 3 basis points, or 0.03 percentage points, to 4.21 percent.

The Michigan sentiment index has risen from 77.6 since March, when concern about the war in Iraq sent the index down to 77.6, the lowest level since August 1993.

A separate survey by the Conference Board, released last month, jumped 10 points to 91.7, the highest in fourteen months.

Federal Reserve studies have shown confidence indicators don't always predict changes in spending patterns. In August and September, as the consumer sentiment index fell to 89.3 and 87.7, respectively, personal spending rose, bolstered by recently enacted reduced income tax withholding rates and rebate checks.

Still, economists said the general rise in confidence suggests consumer spending will help boost economic expansion next year.

The U.S. economy may expand 4.4 percent next year, the most since 1997, according to the median of 62 economists' forecasts in a Bloomberg survey. Consumer spending is expected to gain at an average 3.7 percent annual rate next year.

``We have enhanced tourism in the U.S. as well as the first significant job growth in several years,'' Coach Inc. Chief Executive Lew Frankfort said in an interview this week. ``TAll of that creates an environment where luxury goods are better positioned than they have been the last several years.''

Coach, the largest U.S. seller of luxury leather goods, expects sales at stores open at least a year to rise more than 10 percent this quarter.

Retail sales rose a higher-than-expected 0.9 percent last month to $322.4 billion, the Commerce Department said yesterday.

First-time applications for unemployment benefits rose to 378,000 last week, the highest level in six weeks, partly because some workers fired the week of Thanksgiving waited to file, the Labor Department reported. Weekly unemployment claims have stayed below 400,000 the past 10 weeks. Some economists consider that to be the cut off between labor market expansion and contraction.

Gains in the Dow Jones Industrial Average and the Standard & Poor's 500 index since the beginning of November after rising 18 percent and 19 percent, respectively. The Dow has risen 1.26 percent the past six weeks and surpassed 10,000 earlier this week for the first time in a year and a half before settling back down. The S&P has risen less than 1 percent since Nov. 3.

Last Updated: December 12, 2003 10:08 EST

DJ Univ Michigan -3:Index Vexes Economists,May Be Aberration

.

The Michigan consumer sentiment index comes at a critical point in the U.S. economy. A broad array of economic statistics, from those dealing with overall output to business spending and profits, have been marching steadily upward. This has led to widespread confidence among forecasters and policy makers that after several false starts from the recession of 2001, a true economic recovery is now happening.

The Federal Reserve, in a meeting Tuesday, said that recent economic news "confirms that output is expanding briskly" and that labor markets are "improving modestly."

But policy makers kept interest rates steady as they continued to worry that inflation levels remain lower than what they are comfortable with. Policy makers again said they would keep interest rates low for a "considerable period," repeating a commitment they have been making since late summer.

Labor-market conditions - critical to the formation of consumers' views on the economy - remain somewhat tepid, despite recent gains. In minutes from an October policy meeting released Thursday, the Fed policy makers fretted that labor markets would take some time to recover, and indeed, the November nonfarm payrolls report showed the weakest overall gain in several months.

Still, consumers continue to spend, and that is what is important. Fed officials have said repeatedly that spending trumps what consumers say about their feelings in every case.

Economists were unsure about how to interpret the Michigan data. "Clearly the news seems to be at odds with recent data," said Joe Lavorgna, economist with Deutsche Bank in New York.

The report may simply be an aberration, he said. "Maybe they got a few grinches ahead of the holidays," Lavorgna said.

The Michigan survey is based on a survey of around 250 households, conducted by phone. The final report includes 500 respondents, a considerably smaller survey size relative the Conference Board consumer confidence survey, which polls 5,000 households.

-By Michael S. Derby, Dow Jones Newswires; 201-938-4192; michael.derby@dowjones.com

(END) Dow Jones Newswires

12-12-03 1025ET- - 10 25 AM EST 12-12-03

No matter the scenario, December is the "scared to death for your job month" based on history. Companies always cut in December. It is a year end ritual seen time and time again ever since the late 70's. It wouldn't be an American Christmas without firing herds of decent people in the month of December.

Quarter to quarter management is no way to run an organization but it's become the norm in America. A five year plan does not exist anymore. A one year plan is crusty, inflexable, and so old school. No, our corporate world lives quarter to quarter with a finger on the trigger on one hand and a self back patting hand on the other. Those have become the two dominant management methods in America and Wallstreet seems to love it.

Sad........Trust nobody any farther out than your last paycheck in the corporate world.

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