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Consumer mood lifts despite talk of downturn

The mood of the American public unexpectedly brightened a bit in January, but failed to silence the drumbeat of talk about a possible economic downturn.

A second report yesterday, though, showed leading economic indicators for December continued to weaken, suggesting growth will remain sluggish.

The reports came on a day when the White House announced plans for temporary tax cuts and other measures to fend off a possible recession. The U.S. Federal Reserve is also widely expected to slash interest rates by the end of the month. The stock markets were down again yesterday.

The Reuters/University of Michigan consumer confidence reading for January was 80.5, well above the Wall Street consensus of 74.5. The reading rose from 75.5 in December, which was the weakest since October, 2005, right after Hurricane Katrina.

"Given that economic conditions worsened significantly in early January, the current improvement in consumers' mood is hard to justify," said Anna Piretti, economist at BNP Paribas in New York.

Consumers took a negative view of their finances, shell-shocked as year-end statements on retirement savings accounts and brokerage accounts started to flood their mailboxes. The University of Michigan said the data were consistent with personal spending growth of a modest 2 percent in 2008 - hardly suggesting boom times.

Separately, the leading economic indicators index skidded 0.2 percent in December, registering its third consecutive monthly decline and signaling that the U.S. economy likely will weaken further.

Some economists believe that the credit crunch and troubled housing market have thrown the U.S. economy into recession, which means less consumer spending.

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