Consumer sentiment rose to its highest level in six months in early December as Americans adopted an improved economic outlook while the trade deficit narrowed in October, pointing to gathering momentum in the economy.
The Thomson Reuters/University of Michigan's preliminary reading on their index of consumer confidence climbed for a fourth straight month to 67.7, beating expectations as it rose from 64.1 in November.
U.S. consumers appear to be ending the year in a better mood, said Paul Dales, an economist at Capital Economics in London.
Improved confidence could lead Americans to spend more readily, which would add to the recent momentum from retail sales and factory output. At the same time, the narrowing in the trade deficit showed more of the purchases U.S. businesses and consumers are making were produced within the country.
Employment has also made gains in recent months, although some economists expect the pace of improvement will be too slow for consumers to ramp up spending for long.
Although the recent increase may provide that little bit of support to spending in the malls in the coming weeks, it won't lead to a long and lasting acceleration in consumption growth, said Dales.
The sentiment reading exceeded the 65.5 forecast by analysts who were polled by Reuters.
Measures of consumers' current and future assessment of economic and financial conditions also rose to their highest levels since June.
The gauge of consumer expectations jumped to 61.1 from 55.4 in November.
Stocks held onto gains following the data's release, and were rising after EU leaders agreed on measures that partially addresses the region's debt crisis, while the dollar weakened.
Sorting out the euro zone's debt travails is important for U.S. growth prospects. Any worsening in the crisis could derail the U.S. recovery from the 2007-2009 recession.
Separately, Commerce Department said the U.S. trade deficit narrowed in October to its lowest in 10 months.
(That) gets the fourth quarter off to a good start in terms of the trade effect on gross domestic product, economists at Wells Fargo said in a note to clients.
The trade gap totaled $43.5 billion, in line with a consensus estimate from analysts before the report.
While the shrinking trade gap bodes well for fourth-quarter economic output, both exports and imports declined, a sign of some softening in domestic and overseas demand.
(Additional reporting by Doug Palmer in Washington; Writing by Jason Lange in Washington; Editing by Neil Stempleman)