Consumer Sentiment Improves in January

Consumer confidence picked up somewhat in January, but the recent payroll tax hike put a ceiling on any major gains, according to the latest ""survey of consumers"":http://thomsonreuters.com/content/financial/pdf/i_and_a/438965/2013_02_01_payroll_tax_hike_narrows_gains_confidence from ""Thomson Reuters"":http://thomsonreuters.com/ and the ""University of Michigan"":http://www.umich.edu/ (UMich).

[IMAGE]

The Index of Consumer Sentiment climbed slightly to 73.8 in January from December's 72.9. The index read 75.0 in January 2012.

Meanwhile, the two components of the index moved in opposite directions: The Expectations Index posted a gain to 66.6 in January from 63.8 in December, while the Current Conditions Index declined to 85.0 in January from 87.0 in December.

[COLUMN_BREAK]

According to a release accompanying the survey, January's potential gains were dulled by the payroll tax increase, which has had a significant impact on lower income households; most of January's improvement in confidence actually came from households with incomes above $75,000.

""The personal finances of consumers has weakened considerably compared with the closing months of 2012,"" Thomson Reuters/UMich said. ""The January decline was due to households with incomes below $75,000 reporting more frequent losses than could be offset by upper income households.""

According to the survey, 13 percent of lower income households reported gains in disposable income in January (down from 21 percent in December) compared to 38 percent of upper income households (up from 25 percent).

While concern about disposable income has some households fretting their current situation, more consumers expressed optimism that economic conditions will improve rather than worsen in 2013. However, while respondents are less fearful of a downturn this year, nearly 60 percent expect a downturn sometime in the next five years.

Overall, consumers said they do not anticipate a significant decline in the unemployment rate in 2013, though they do anticipate a slowly falling rate.