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Consumer confidence dipped in early January, as rising gas prices overshadowed an improved job outlook and passage of temporary federal tax breaks. The preliminary reading of the Reuters/University of Michigan Consumer Sentiment Index dropped to 72.7 in January, down from 74.5 in December and 74.4 in January 2010.

Consumers’ current view of the economy was negatively affected by gas prices hitting the $3 mark, as the surveys’ barometer of current economic conditions was 79.8 in early January, down sharply from 85.3 in December and below the 81.1 reading last January.

However, consumers are more optimistic about the future economic outlook. The 12-month economic outlook index jumped to 87, which was the highest since September 2009, and the survey’s gauge of consumer expectations rose to 68.2 from 67.5 in December.

In addition, just 21 percent of consumers surveyed expected the unemployment rate to increase in the year ahead, the lowest figure recorded in 10 years.

“The stronger performance of the economy was expected to be reflected in the near term by more favorable expected changes in employment,” Richard Curtin, director of surveys of consumers from Thomson Reuters and University of Michigan, said in a statement.

Consumer confidence increased in December to its best level since June as improved expectations for the job market as well as recent passage of tax legislation helped to offset consumers’ grim view of their own personal finances.

The Reuters/University of Michigan Consumer Sentiment Index rose to 74.5 in December, up from 71.6 in November and 67.7 in October. Consumers have a much rosier view of the current state of the economy, as the Current Conditions Index stands at 85.3, up from 82.1 in November and 9.4% higher than a year ago.

Surveys of Consumers chief economist, Richard Curtin, said “The best holiday gift to consumers was news that job gains were on the horizon.”

However, consumers’ view of their personal financial prospects remain dismal. The Expectations Index rose to 67.5 from 64.8 in November, but remains 2% below levels from a year ago:

• Just 23% reported recent gains in their finances, unchanged from last December, as twice as many consumers reported income declines as income advances
• Just one-in-four consumers expected their finances to improve in the year ahead, which has remained unchanged for the past six months
• The majority of consumers anticipated no income increases during the year ahead, as they have for a record 24 consecutive months

Curtin noted “Compared with the more favorable prospects for the overall economy, consumers have maintained a very cautious outlook for their own finances. They have good cause to be cautious. This was the second time in 2010 that news of job gains prompted a rally in confidence. Indeed, consumers voiced nearly the same confidence at the end of 2010 as at the start of the year.”