US consumer sentiment improves; trade gap narrows

An index of consumer sentiment rose to its highest in six months in early December and the trade deficit narrowed in October in the latest signs that the US economy's health is slowly improving. The Thomson Reuters/University of Michigan preliminary December reading on consumer confidence Friday climbed for a fourth straight month to 67.7 from 64.1 in November.
"US consumers appear to be ending the year in a better mood," said Paul Dales, an economist at Capital Economics in London. Improved confidence could lead Americans to spend more readily, which would add to the recent momentum gained from strong retail sales and factory output. Also supporting growth, the narrowing in the trade deficit showed that more goods and services bought by US businesses and consumers were produced within the country.
Employment has also made gains in recent months, although some economists expect the pace of improvement will be too slow for consumers to ramp up spending for long. "Although the recent increase may provide that little bit of support to spending in the malls in the coming weeks, it won't lead to a long and lasting acceleration in consumption growth," said Dales.
US economic growth appears to be accelerating, even as the global economy slows. The eurozone, for example, is widely believed to be slipping into recession as it struggles to contain a sovereign debt crisis. That crisis, as well as the possibility that the United States will not renew extended unemployment benefits and a payroll tax cut next year, amount to dark clouds looming over the economy.
With signs US growth is quickening coming against big risks to the outlook, the US Federal Reserve is expected to hold monetary policy steady at a meeting on Tuesday. Despite the improvement, the consumer sentiment gauge remains well below its historical average, underscoring the fragility of US household budgets as many struggle with a weak jobs market.
Separately, the Commerce Department said the US trade deficit narrowed in October to its lowest in 10 months. The economy expanded at a 2.0 percent annual rate during the third quarter, and J.P. Morgan said the trade report meant growth during the fourth quarter could exceed its 3.0 percent forecast. The trade gap totalled $43.5 billion, in line with a consensus estimate from analysts before the report.