NEW YORK: US consumer sentiment improved in early August to the highest in three months as sales at retailers and low mortgage rates spurred Americans to boost their buying plans, a survey showed yesterday.
But concerns about rising food prices caused a jump in both short- and long-term inflation expectations, according to the Thomson Reuters/University of Michigan consumer sentiment survey.
The data reinforced the view that economic growth could pick up in the second half of the year but still be lacklustre. That was reinforced by July's leading indicator.
Growth and hiring were disappointing in the spring, but hiring picked up in July and consumers are now feeling more confident about spending, though they remain concerned about the economic outlook.
With stubbornly high unemployment and a weaker global economic picture, some analysts have raised their expectations that the Federal Reserve could launch a new round of bond buying to help prop up the economy.
"We've had this mixed bag from the economic data," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati, Ohio. "We are all just kind of wondering 'Is this recovery real?'"
The preliminary reading on the index on consumer sentiment rose to its highest level since May, at 73.6 from 72.3 last month, topping economists' forecasts for a slight uptick to 72.4.
Americans were also more optimistic about the state of the economy, with the measure of current economic conditions rising to its highest level since January 2008 at 87.6 from 82.7.
Purchasing plans were bolstered by cheap prices, and the measure of buying conditions for household durables rose to 140 from 130.
Consumers' outlook cooled, with the expectations index slipping to 64.5 from 65.6, the lowest since December. The majority of households expected no income increase during the year ahead, while one-in-four thought the unemployment rate would rise.
"People are still concerned about jobs, but they're seeing home prices stabilise so they're feeling better about that," said Gary Thayer, chief macro strategist at Wells Fargo Advisers in St Louis.
Growth in personal spending is likely to be just under two per cent into early next year, said survey director Richard Curtin. The one-year inflation expectation rose to the highest level since March at 3.6pc from 3pc as consumers worried about the impact a drought in the US Midwest could have on food prices.
The five-to-10-year inflation outlook also gained, to 3pc from 2.7pc.
Separate data showed a gauge of future US economic activity improved in July on a drop in new claims for jobless benefits and an increase in housing permits. Still, the reading pointed to sluggish growth ahead. The Conference Board said its Leading Economic Index climbed 0.4pc to 95.8 for July, reversing a 0.4pc decline in June. The odds that the Fed will launch a third round of bond buying, known as quantitative easing, have risen to 60pc, according to a Reuters poll.
The majority thought the central bank's next policy meeting in September was the most likely time for an announcement. The consensus was for $500 billion in bond purchases, adding to the $2.3 trillion in assets the Fed has already bought.