Consumer sentiment perks up while trade gap widens

Separate data earlier in the day showed the trade deficit widened in November to its largest in five months, suggesting imports weighed on economic growth a bit more than expected during the fourth quarter.

The Thomson Reuters/University of Michigan preliminary January reading on its overall index of consumer sentiment rose to 74.0 from 69.9 in December for the fifth month of gains and the highest level since May 2011.

The report topped expectations of 71.5 and was in contrast to December's weaker-than-expected retail sales reported on Thursday.

"This shows even though the retail sales number this week was disappointing there could be a little more underlying strength," said Kathy Lien, director of research at GFT Forex in Jersey City.

"I'd be wary of looking at this as a shift in long-term confidence, but I'd look at this as good news today."

Financial markets reacted little to the consumer confidence data as investors focused on reports that Standard & Poor's was set to downgrade the ratings on several euro zone countries. Wall Street was down about 1 percent in early trade.

U.S. Commerce Department data showed the trade gap totaled $47.8 billion in November, exceeding analysts' forecast of a $45.0 billion deficit.

A wider deficit shows that more goods and services bought by U.S. businesses and consumers were produced outside the country, subtracting from gross domestic product.

"The external outlook does not bode well for U.S. exports, as a deceleration in global growth will coincide with a stronger U.S. dollar due to lingering financial concerns regarding Europe's sovereign debt turbulences," Martin Schwerdtfeger, senior economist at TD Bank Group, wrote in a note.

Separately, a dip in import prices showed inflation pressures were still muted, giving the Federal Reserve wiggle room as it holds U.S. benchmark interest rates at ultra-low levels.

Import prices were down 0.1 percent in December after a 0.8 percent gain in November, in line with economists' expectations.

Thirty-four percent of consumers polled in the consumer confidence survey said they had heard of recent job gains, a record high in the survey's history and well above December's 21 percent.

"The data suggest a stronger consumer spending outlook, rising to about a 2.1 percent gain in 2012," survey director Richard Curtin said in a statement.

But consumers still lacked confidence in government economic policies with the majority rating policies unfavorably for the sixth month in a row.

Americans also remained dour on their personal finances with just 24 percent expecting their finances to improve in January, slightly below 25 percent last month.

The survey's barometer of current economic conditions rose to the highest since February at 82.6 from 79.6, while its gauge of consumer expectations gained to 68.4 from 63.6.

(Reporting By Leah Schnurr, Additional reporting by Luciana Lopez in New York and Jason Lange in Washington; Editing by Andrea Ricci and James Dalgleish)