U.S. confidence seen declining into holidays: U.Mich

NEW YORK - U.S. consumers reeling from job losses and holding back on big-ticket purchases worry that the unemployment rate will peak at 10.75 percent in the year ahead, the director of the Reuters/University of Michigan Surveys of Consumers said on Friday.

"In real terms we are probably not going to see an increase in retail sales over the holidays," Richard Curtin, director of the survey, told Reuters Insider television.

Curtin said retailers will certainly discount merchandise however the market will have narrowed as consumers "hold back" on buying.

Earlier, the preliminary November survey's consumer sentiment reading fell to 66.0 from October's final 70.6.

Economists in a Reuters survey had expected a preliminary November reading of 71.0.

Curtin said the survey found just one in 10 consumers saw an increase in their income, the fewest recorded in data going back to 1946, and that 36 to 37 percent of those surveyed said their income had declined.

"This is really a concern for consumers that their financial situation is just heading south and there is really little hope that they can expect to improve in the year ahead," he said.

However, Curtin said consumers believe there will eventually be an improvement in the economy but "at a much slower pace".

Curtin added that consumers reported they were more concerned about income and job losses than in prior surveys. Many reported that as a result "they just weren't considering a major purchase in the coming months."

The U.S. government's "cash for clunkers" program which offered rebates on newer, fuel-efficient cars had only frontloaded consumer spending, Curtin said.

"It created a favorable bump" for manufacturers but the purchasing plans for cars, he said, have since fallen back to levels prior to the program's start.

The economic stimulus plan offered by U.S. President Barack Obama was met with enthusiasm by consumers, Curtin said, but "Since then they have lost their favorable opinion of the program in so far as it helps their own financial situation. They still think it will help the overall economy."

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