By  on December 29, 2004

NEW YORK — Consumers are ending 2004 on a high note, breaking a four-month slide in the confidence index due to optimism about their income prospects.

The Conference Board’s Consumer Confidence Index rose to 102.3 in December, up from 92.6 last month, surpassing the 93.9 consensus projection by Wall Street economists. It had been in decline since August. While the Index rebounded in December to its highest level in five months, it didn’t pass the high reached in July when it was at 105.7. Looking ahead, the Expectations Index rose to 99.9 from 90.2 and the Present Situations Index jumped to 105.9 from 96.3.

The surge in consumer confidence sent U.S. stock indices to three-and-a-half-year highs. The Dow Jones Industrial Average rose 78.41 points to end trading on Tuesday at 10,854.54; the Nasdaq rose 22.97 points to 2,177.19, and the S&P 500 gained 8.62 points to 1,213.54.

“The continuing economic expansion, coupled with job growth, has consumers ending the year on a high note,” said Lynn Franco, director of the Board’s Consumer Research Center.

“The most significant contributor to the rebound in confidence has been the overall improvement in current conditions over the past twelve months. And consumers’ outlook suggests that the economy will continue to expand in the first half of the new year,” she added.

While retail sales during December have seemed somewhat disappointing, suggesting that cautious shoppers were walking the aisles on the prowl for bargains, economists are pointing to the increased use of gift cards and the online shopping channel as more accurate reflections of how consumers were spending their hard-earned cash over the holidays.

Richard Hastings, an independent economic consultant, observed, “I don’t think retail sales will be down when the final numbers are tallied. The problem is that retail sales figures don’t take into account gift-card sales, which rose 8.1 percent over last year, according to Spendingpulse.com. Once you add in gift-card sales and holiday shopping online, spending by consumers for holiday is actually higher. Before, you really didn’t want to do any online shopping with dial-up connections. But now, many have broadband and other high-speed connections, which has helped spread online shopping as a viable channel.”

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