Consumer sentiment rose more than expected in August and expectations hit the highest level since the recession began, indications that Americans’ pessimism about the economy may be lifting. The housing sector also showed signs of life as a national measure of home prices posted its first quarterly increase in three years. The New York-based Conference Board says its Consumer Confidence index rose to 54.1 from an upwardly revised 47.4 in July. Economists surveyed by Thomson Reuters had expected a slight increase to 47.5.
Still, the index is well below 90, the minimum level associated with a healthy economy. Anything above 100 signals strong growth. Economists closely monitor confidence because consumer spending accounts for about 70% of U.S. economic activity. Consumer sentiment—fueled by signs the economy is stabilizing—has recovered a bit since hitting a record low of 25.3 in February. Many analysts expect the economy to grow 2% to 3% in the current July-September quarter, spurred by a more stable housing market and the Cash for Clunkers program, which boosted auto sales. But economists worry that without healthier consumer spending, the recovery may weaken next year.
