Confidence among U.S. consumers in August rose more than projected to the highest level in three months, reinforcing signs the world’s largest economy is improving.
The Thomson Reuters/University of Michigan final index of consumer sentiment climbed to 74.3 from 72.3 the prior month. The gauge was projected to rise to 73.6, according to the median forecast of 60 economists surveyed by Bloomberg. The preliminary reading for August was 73.6.
Recent reports showing the best job growth in five months and the first gain in home prices since 2010 may be helping lift moods, improving the odds household spending, which accounts for about 70 percent of the economy, will be sustained. At the same time, rising fuel costs and concerns about impending tax changes may be preventing bigger gains in sentiment.
“Consumers are getting a sense that the economy is doing slightly better,” Yelena Shulyatyeva, a U.S. economist at BNP Paribas in New York, said before the report. “Recent economic data have been modestly stronger than expected. People do notice these things and react to news right away.”
Estimates for the confidence measure ranged from 72 to 75.2, according to the Bloomberg survey. The index averaged 64.2 during the last recession. It averaged 89 in the five years before the 18-month economic slump that ended in June 2009.
Today’s report contrasts with the Bloomberg Consumer Comfort Index, which hovered close to a seven-month low last week as Americans’ view of the buying climate fell to the lowest level of the year, according to figures reported yesterday.
The New York-based Conference Board’s index decreased to 60.6 in August, the lowest level since November, from a revised 65.4 the prior month, figures from the private research group showed this week.
The Michigan survey’s index of current conditions, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars, rose to 88.7 from 82.7 the prior month.
The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, fell to 65.1 from 65.6 in July.
Among recent reports pointing to an improvement in the economy, payrolls increased in July by 163,000 workers, the most since February. At the same time, the unemployment rate rose to 8.3 percent last month, and has been above 8 percent since February 2009, the longest stretch in the post-World War II era.
Housing is also recovering. Home prices in 20 U.S. cities climbed 0.5 percent in June from a year earlier, the first increase since a tax credit boosted sales in 2010, according to the S&P/Case-Shiller index released this week. Nationally, property values jumped last quarter by the most in more than six years, the data also showed.
A Commerce Department report yesterday showed Americans stepped up purchases in July for the first time in three months as incomes increased. Faster gains may become harder as fuel costs climb.
Gasoline jumped 50 cents a gallon since July 1 to $3.83 on Aug. 30, according to AAA, the nation’s biggest auto organization. This year’s national average cost for Labor Day, which falls on Sept. 3, may be “the highest ever for the holiday,” according to an e-mail from AAA spokesman Michael Green in Washington.
Retail executives say customers are shopping for bargains. Jos. A. Bank Clothiers Inc., a Hampstead, Maryland-based clothing chain, reported second-quarter profit that topped analysts’ estimates. At the same time, “strong promotional activity is driving the sales increases,” Chief Executive Officer Neal Black said on a conference call this week.
“Customers remain price-sensitive,” he said. “They continue to watch their spending and demand value.”
Consumers in today’s confidence report said they expect an inflation rate of 3.6 percent over the next 12 months, compared with 3 percent in the prior survey.
Over the next five years, the figures tracked by Fed policy makers, Americans expected a 3 percent rate of inflation, up from 2.7 percent in the previous report.