Consumer sentiment improves more than expected in August

WASHINGTON -- 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 said Tuesday 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 has boosted auto sales.

But economists worry that without healthier consumer spending, the recovery may weaken next year.

The housing slump and a weak job market have made consumers reluctant to spend. But the outlook for jobs is improving, the Conference Board said, with fewer respondents saying positions are "hard to get," and more claiming they are "plentiful."

Consumers' expectations for the economy over the next six months rose to 73.5 from 63.4 in July, the highest level since December 2007, when the recession began. The consumer confidence survey was sent to 5,000 households and had a cutoff date for responses of August 18.

Sal Guatieri, an economist at BMO Capital Markets, said the jump in the expectations index meant consumers likely will spend more in the months ahead.

"It won't be a smooth ride, but with consumer confidence now tracking higher, the groundwork for a sustainable recovery appears to be in place," he wrote in a note to clients.