WRAPUP 3-Consumer sentiment, trade signal firmer US recovery

* Consumer sentiment up in December

* Trade gap shrinks as exports rise 3.2 percent in October

* Smaller Oct deficit could boost Q4 growth estimates

By Edward Krudy and Doug Palmer

NEW YORK/WASHINGTON, Dec 10 (BestGrowthStock) – A rise in U.S.
consumer confidence to its highest level in six months and a
much bigger-than-expected contraction in the country’s trade
deficit pointed to a firmer economic recovery on Friday.

The boost in consumer confidence on the back of an
improving jobs outlook was another indication consumers are
willing to spend over the holidays while a rise in exports
looks set to lift economic growth this quarter.

The data fits into a pattern of an economy that is gaining
traction after a slowdown in the summer and is likely to
intensify the debate over whether the Federal Reserve needs to
keep stimulating the economy through asset purchases.

“We are in the gradual recovery camp and are definitely on
the upper side of that now,” said Pierre Ellis, senior global
economist at Decision Economics in New York. “It adds to a
growing number of economic indicators that are looking
better-than-expected.”

Consumer sentiment in December rose to its highest level
since June and was at its third-highest since the start of 2008
according to a Thomson Reuters/University of Michigan survey.
Government data showed U.S. exports in October rose a robust
3.2 percent while imports declined slightly.

U.S. stock indexes were marginally higher after the
reports, hovering close to new recent highs. U.S. Treasury bond
prices added to losses while the dollar gained.

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For a graphic on consumer sentiment data, see

http://r.reuters.com/paz59q

For a graphic on the U.S. trade deficit, see

http://r.reuters.com/vut59q

For a graphic on the U.S. trade gap and the dollar, see

http://r.reuters.com/cyt59q

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The survey’s preliminary December reading for consumer
sentiment came in at 74.2, up from 71.6 in November. That was
above the the median forecast of 72.5 among economists polled
by Reuters.

Consumers cited a more favorable jobs outlook, chiming with
recent data pointing to some improvement in the labor market.
But slow jobs growth and high unemployment is still one of the
biggest impediments to the recovery.

Although the unemployment rate edged up to 9.8 percent in
November, new claims for unemployment benefits fell more than
expected last week and the four-week moving average slipped to
a fresh two-year low.

Federal Reserve Chairman Ben Bernanke has hinted that the
central bank may increase its $600 billion bond purchasing
program if unemployment continues to stay high.

The sentiment survey’s barometer of current economic
conditions rose to its highest reading since January 2008, just
after the economic downturn began. The index for December came
in at 85.7, up from 82.1 in November and above a forecast of
83.1.

Meanwhile, the U.S. trade deficit for October totaled $38.7
billion, down from a revised estimate of $44.6 billion for
September. Analysts surveyed before the report had expected the
deficit to narrow just slightly to about $43.60 billion.

Record exports to China and Mexico in October helped push
the overall export tally to $158.7 billion, the highest since
August 2008. Exports to the European Union and Japan also
grew.

Despite record exports to China in October, the U.S. trade
deficit with that country in the first 10 months of 2010 was
$226.8 billion, up 20.3 percent from the year-earlier period.

The sharp rise is likely to keep China’s trade and currency
policies on the minds of U.S. lawmakers in 2011.

The smaller-than-expected trade deficit could boost
estimates for U.S. fourth-quarter economic growth because it
implies a larger share of U.S. demand is being met by domestic
production.

“This suggests that the economy is accelerating,” said Neil
Dutta, an economist at Bank of America Merrill Lynch in New
York, raising his forecast of fourth-quarter economic growth to
about 3.0 percent.

On an annual basis, the trade deficit has widened sharply
this year and could surpass $500 billion when final figures for
2010 are available. Last year, in the midst of the global
financial crisis which put a squeeze on world trade, the U.S.
trade gap narrowed about 46 percent to $374.9 billion.
(Editing by Andrea Ricci)

WRAPUP 3-Consumer sentiment, trade signal firmer US recovery