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Confidence among U.S. consumers increased in December for the first time in three months as the pace of job cuts slowed, easing concern spending will falter.

The Reuters/University of Michigan preliminary index of consumer sentiment rose to 73.4, higher than forecast, from 67.4 in November, according to data released today. The December figure exceeds the average of 65 for the first nine months of the year.

Improved sentiment may help fuel spending and sustain the recovery entering 2010. Retail sales, which increased more than forecast last month, may still prove uneven in coming months until companies begin hiring again, limiting how fast the economy will be able to expand.

“Consumers are clearly showing some willingness to spend,” said Avery Shenfeld, chief economist at CIBC World Markets in Toronto. The rise in confidence is “consistent with the modest improvement we’ve seen in the pace of layoffs and the payrolls data.”

Retail sales increased 1.3 percent in November after a 1.1 percent gain in the prior month, the Commerce Department reported earlier today. Sales excluding autos climbed 1.2 percent, the biggest rise since January.

The consumer sentiment index was forecast to rise to 68.8, according to the median of 71 economists surveyed by Bloomberg. Estimates ranged from 66 to 74. The final December figure is scheduled to be released on Dec. 23. During the expansion that began in late 2001 and ended in December 2007, the index averaged 89.2.

Stocks Gain

Stocks and Treasury yields rose after the reports. The Standard & Poor’s 500 Index added 0.4 percent to 1,106.41 at 4:11 p.m. in New York. The yield on the 10-year Treasury note increased to 3.55 percent from 3.50 percent late yesterday.

The University of Michigan’s measure of current conditions, which reflects Americans’ perceptions of their own finances and whether it’s a good time to buy big-ticket items such as cars and homes, jumped to 79.1, the highest since March 2008, from 68.8 in November.

The index of expectations six months from now, which more closely projects the direction of consumer spending, increased to 69.7 from 66.5 last month.

Consumers in the Michigan survey said they expect an inflation rate of 2 no fax cash advance.1 percent over the next 12 months, compared with 2.7 percent in the November survey. Over the next five years, the figures tracked by Fed policy makers, Americans expect a 2.6 percent rate of inflation compared with 3 percent projected last month, today’s report showed.

Labor Market

The pace of job cuts has been slowing. First-time jobless claims have held below 500,000 for the last three weeks after peaking at almost 700,000 in late March. The unemployment rate in November fell to 10 percent from a 26-year high of 10.2 percent, while companies shed 11,000 workers, the fewest since the recession began.

President Barack Obama is appealing for bipartisan support for a new set of measures to help spark job creation, including help for small businesses keep and infrastructure projects.

Economists forecast unemployment to exceed 10 percent through the first half of 2010. The world’s largest economy will expand 2.6 percent in 2010 after shrinking 2.5 percent this year, according to the median forecast of 58 economists surveyed by Bloomberg from Dec. 1 to Dec. 8.

Consumer spending, which accounts for about 70 percent of the economy, will grow 1.8 percent next year after declining 0.6 percent in 2009, the worst performance in 35 years, according to the survey median.

Retail Demand

Li & Fung Ltd., the biggest supplier of clothes and toys to Wal-Mart Stores Inc., said demand from client Kohl’s Corp. and other “mid-tier” retailers is rebounding.

“The last few weeks, as we’re going into Christmas, most retailers have felt positive” and have increased orders for spring, Bruce Rockowitz, president of Hong Kong-based Li & Fung, said in an interview yesterday.

Auto sales in the U.S. increased to a 10.92 million annual rate in November from 10.45 million a month earlier, industry data showed. General Motors Co., Toyota Motor Corp., Ford Motor Co. and Chrysler Group LLC all posted results that beat analysts’ estimates.

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