The latest survey from Conference Board showed a decline even after reports are showing that people increased their holiday spending at the biggest rate in four years and other indicators suggest the economy is brightening.
The private research group said Tuesday its Consumer Confidence Index fell to 52.5 in December, down from a revised 54.3 in November. Economists were expecting 55.8. The decline reverses two consecutive months of increases. It takes a reading of 90 to indicate a healthy economy, a level not approached since the recession began in 2007.
People are less confident even though layoffs are slowing, businesses are buying more goods, and consumers are spending more money. Economists have raised their growth forecasts for the final months of the year and 2011.
Still, home prices fell in the nation's largest cities and are expected to decline further next year. Every city in the Standard & Poor's/Case Shiller 20-city home price index showed a monthly price decline in October from September_ the first time that has happened since Feb. 2009.
And the unemployment rate increased to 9.8 percent in November from 9.6 percent in October.
"Although the economy is growing again, consumer attitudes are lagging behind broader economic developments," said Steven Wood, chief economist at Insight Economics. Woods said people are more concerned with high unemployment, falling home prices and the number of foreclosures.
Economists watch confidence closely because consumer spending accounts for about 70 percent of U.S. economic activity.
One measure of the Confidence Index, which assesses how shoppers feel now about the economy, declined to 23.5 in December, from 25.4 in November. The other barometer, which measures how shoppers feel about the economy over the next six months, fell to 71.9 from 73.6 in November.
Fewer people see jobs as "plentiful", the survey noted, while more described jobs as "hard to get."
"Despite this month's modest decline, consumer confidence is no worse off today than it was a year ago," said Lynn Franco, director of Consumer Research Center at The Conference Board, in a statement. "Consumers' assessment of the current state of the economy and labor market remains tepid, and their outlook remains cautious. "
Still, people spent more this holiday season than the past year, a sign that they have some faith in the economy. Retails had to work to get their money, offering free shipping and discounts as early as October.
"The consumer is still very value-driven," said Scott Krugman, a spokesman at the NRF, the nation's largest retail trade group. "(The holiday season) is encouraging. The reality is that consumers need more proof that we are out of a recession. Hopefully, that will happen in 2011."
The National Retail Federation predicts spending this holiday season, Nov. 1 through Dec. 31, will reach $451.5 billion. That's up 3.3 percent over last year. That forecast was upgraded earlier this month based on a robust November. That would be the biggest increase since 2006, and the largest total since a record $452.8 billion in 2007. The NRF forecast excludes revenue from restaurants, gas and autos and only looks at online sales from physical stores.
The International Council of Shopping Centers said Tuesday that revenue at stores opened at least a year is so far tracking at 4.0 percent, which would make it the strongest growth rate since 2006, when the figure was 4.4 percent. The period is from Nov. 1 through Saturday. The measure is a key indicator of a retailer's health.
The Consumer Confidence Index is based on a survey of 5,000 consumers with a cutoff date of Dec. 20.