Consumer Confidence Reading Ticks Higher

Confidence among consumers for the month of January increased to the highest levels seen in two years as companies slow job cuts and the economy expands.

The University of Michigan/Reuters final index on consumer sentiment rose to 74.4, up from the 72.5 in the prior month. The final number is up from the preliminary reading of 72.8.

The final reading for January was ahead of the economist consensus of 73.

The future of the consumer sentiment index will rely on the creation of jobs, which during the economic recovery from the recession has been the lacking indicator. President Barack Obama proposed on Friday a tax break for businesses that hire employees in the latest stimulus measure taken by the government.

Historically consumer spending has accounted for 60 percent to 65 percent of the U.S. gross domestic product, making the consumer sentiment index an important indicator for investor to gauge as it provides insight into the consumer’s spending plans.

One component of the data includes the personal finances index, which rose to 77.0 in January from 73.0 in the month prior. The index of expectations grew to 70.1 from 68.9, while the current conditions index improved to 81.1 from 78.0, according to the Reuters/Michigan report.

"Consumers are overwhelmingly convinced that the worst is over but nonetheless expect stagnating income and job prospects rather than solid growth during the year ahead," the report stated.

Job creation will continue to be the missing key for consumer sentiment and the GDP to continue grow and stabilize the recovery.