Consumer confidence improved more than projected in August as merchant discounts and record-low interest rates help U.S. households bolster finances.
The Thomson Reuters/University of Michigan final sentiment index climbed to 74.3, a three-month high, from 72.3 in July. The gauge averaged 89 in the five years leading up to the recession. Other reports indicated manufacturing is cooling.
Incentives by companies such as General Motors Co. (GM) are boosting sales, just as Federal Reserve efforts to lower borrowing costs are allowing Americans to reduce debt, which may underpin consumer spending. Nonetheless, Fed Chairman Ben S. Bernanke today said additional action to spur growth remains an option because unemployment is a “grave concern.”
“Confidence is lackluster,” said Jim O’Sullivan, chief U.S. economist for High Frequency Economics Ltd. in Valhalla, New York, who projected a gain in sentiment. “It typifies the economy right now. It’s not strong, but not collapsing either.”
The Standard & Poor’s 500 Index climbed 0.2 percent to 1,402.70 at 1:19 p.m. in New York. The yield on the 10-year Treasury note fell to 1.58 percent from 1.62 percent late yesterday.
The concern with elevated joblessness is global. Euro-area unemployment rose to a record 11.3 percent in July, the same as in June after that month’s figure was revised higher, a report today showed.
In Japan, consumer prices slid at a faster pace in July and industrial production unexpectedly slumped, raising the danger that the world’s third-largest economy has slipped back into a recession.
Survey Results
The U.S. consumer sentiment gauge was projected to rise to 73.6, according to the median forecast of 60 economists surveyed by Bloomberg. Estimates ranged from 72 to 75.2. The index averaged 64.2 during the 18-month recession that ended in June 2009.
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, a four-year high, from 82.7 the prior month.
The share of households with incomes of less than $75,000 that said it was a good time to buy durable goods was the highest since August 2007, according to the report.
Read more: Business Week