Consumers' mood boosted by lower prices in December

The Reuters/University of Michigan Surveys of Consumers said its final index reading of confidence for December rose to 60.1 from November's 55.3.

The index was above economists' expectations of 58.6, according to the median of forecasts in a Reuters poll. December's final reading was the highest since 70.3 in September, and was also above the preliminary index reading, released on December 12, which was 59.1.

However, "absent the gain due to unusually steep pre-holiday price discounts, the sentiment index would be virtually unchanged," the report said.

"More consumers expected declines in prices than in any other survey since 1960 -- in December, 23 percent expected deflation in the year ahead, three times the level recorded just two months ago."

One-year inflation expectations plunged in December to 1.7 percent, the lowest since July 2003, from 2.9 percent in November.

But price declines were only modestly offsetting tough economic times, according to the report.

"The personal financial situation of consumers remains bleak, with the majority reporting that their finances had worsened during the past year."

"While declines in stocks and home values depleted their wealth, the fewest consumers in the long history of the surveys reported income gains in December," the report said.

The index of current conditions did rise to 69.5 in December from 57.5 in November, while the index of consumer expectations gained modestly to 54.0 from 53.9.

(Reporting by Chris Reese; Editing by Chizu Nomiyama)