Consumer, Investor Confidence Indexes Rise

Two leading confidence gauges were released on Tuesday. The Conference Board’s Consumer Confidence Index rose to 52.9 in December, from an upwardly revised 50.6 in November.

The index is based on a survey of 5,000 U.S. households and needs to reach 90 or above to indicate the economy is stable. A reading of 100 or above indicates strong growth.

“A more optimistic outlook for business and labor market conditions was the driving force behind the increase in the expectations index,” said Conference Board Consumer Research Center Director Lynn Franco. “Regarding income, however, consumers remain rather pessimistic about their short-term prospects, and this will likely continue to play a key role in spending decisions in early 2010.”

Meanwhile, the State Street Investor Confidence Index for December rose 3.1 points to 103.9 from 100.8 in November, State Street Global Markets announced. In North America, the index rose modestly to 103.1 from 102.2, but the rebound was even more pronounced in Asia, where investor confidence rebounded by 6.3 points to 97.5, up from 91.2 in November.

In Europe, however, risk appetite declined a tad to 104.6 from 104.8. The index is based on the buying and selling patterns of institutional investors.

“This month’s uptick in global investor confidence stemmed largely from an improvement in the mood in Asia, where risk appetite rose to an eight-month high,” said Harvard University Professor Ken Froote, who helped develop the index in conjunction with State Street. “Elsewhere, portfolio reallocations were modest. With three of the four indices over the neutral level of 100, institutions are continuing to add to their risky asset positions, but at a slower pace than was evident earlier in the year.

“Investors will be watching for signs of renewed economic growth and well-designed exit strategies from policymakers before making more significant reallocations toward risk in 2010,” Froote continued.