Consumer sentiment improved in December to its highest level in six months as Americans felt better about the economy's prospects for the year ahead, a survey released on Thursday showed.

The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment rose to 69.9 from 64.1 in November.

It topped the median forecast of 68.0 among economists polled by Reuters and beat December's preliminary figure of 67.7.

Overall, real spending is expected to increase by 1.8 percent in 2012 as long as action is taken on extending the payroll tax cut, the survey said.

The survey's barometer of current economic conditions rose to 79.6 from 77.6, while the survey's gauge of consumer expectations gained to 63.6 from 55.4. All three indexes were at their highest level since June.

I think it's a reflection of improving job statistics, we're seeing an increase in retail sales and even housing seems to be going up, said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

A lot of the key bookends of our economy appear to be really strengthening and that's supporting confidence.

Good economic times were expected in the year ahead by 29 percent of respondents, up from 19 percent in November as more consumers heard news of employment gains. Still, they did not expect it to have much impact on the unemployment rate.

Consumers' view of their finances remained gloomy with the majority of families expecting no income increase next year.

The survey's one-year inflation expectation edged down to 3.1 percent from 3.2 percent, while the survey's five-to-10-year inflation outlook held steady at 2.7 percent for the third month in a row.

Financial markets saw little reaction to the release as investors were taking in a slew of other data on Thursday that included the rate of economic growth and initial jobless claims.

(Reporting By Leah Schnurr; Editing by Chizu Nomiyama)