U.S. consumer sentiment rose to its highest in six months in early December due to an improving outlook on the economy with the jobless rate falling to a 2-1/2-year low in November.
Reduced consumer pessimism should reduce jitters about a pullback in consumer spending which could tip the U.S. economy into a recession.
"Consumers have been slightly more upbeat in December as numerous economic data points have surprised to the upside, providing some relief," said Jim Baird, chief investment strategist at Plante Moran Financial Advisors in Kalamazoo, Michigan.
The Thomson Reuters/University of Michigan's preliminary reading on their overall index of consumer confidence climbed for a fourth straight month, to 67.7. This compared with 64.1 in November and a low of 55.7 back in August.
The early December figure exceeded the 65.5 predicted by analysts recently polled by Reuters.
"News about recent economic developments were much more positive in early December. Reports of net job growth have increased in each of the past three months, as have assessments of current conditions in the economy," survey director Richard Curtin said in a statement.
However, the latest survey showed consumers still have a dire view of their personal finances as the job growth remains sluggish and worries over Washington's economic policies.
"The recent gains in confidence are especially vulnerable given that judgments of economic policies remain near all-time lows" Curtin said.
If the White House and Congress fail to reach a deal on extending the federal payroll tax cut, it risks reducing first-quarter consumer spending growth to near zero.
An extension, on the other hand, could lift consumer spending by 1.8 percent in 2012, Curtin said.
Measures of consumers' current and future assessment of economic and financial conditions also rose to their highest levels since June.
The survey's barometer of current economic conditions edged up to 77.9 in early December from 77.6 in November. Analysts had predicted a reading of 78.0.
The gauge of consumer expectations jumped to 61.1 from 55.4 in November. Analysts had forecast a reading of 57.5.
The survey's one-year inflation expectation dipped to 3.1 percent in early December, while the survey's five-to-10-year inflation outlook held steady at 2.7 percent for a third month in a row.
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