Consumer mood up but outlook at 31-year low

A customer shops along the cleaning product aisle at a Sam's Club store in Bentonville, Arkansas June 2, 2011.

NEW YORK (Reuters) - Consumer sentiment in the United States rose in early September, but Americans remained very gloomy about the future with their expectations for the economy falling to the lowest level since 1980.

The Thomson Reuters/University of Michigan's survey showed consumer sentiment edged up to 57.8 from 55.7 in August, creeping back up after a nearly three-year low last month and stronger than economists' expectations.

Even so, the expectations gauge in the preliminary survey inched lower, and three out of four consumers expected bad times for the economy in the year ahead.

Only half of respondents said the same at the beginning of the year.

Consumer spending is a linchpin of the U.S. economy, but confidence has been badly hit as unemployment remains high and wages stagnate. Acrimonious political debate over the United States' debt ceiling dampened sentiment over the summer. So did worries the U.S. economy could fall back into recession.

"The consumer is still very frustrated with virtually everything -- 9 percent unemployment, still very tepid jobs creation and heightened job destruction," said Lindsey Piegza, economist at FTN Financial in New York.

The survey's index of consumer expectations dipped to 47.0 from 47.4, hitting the lowest level since May 1980. The economic outlook for the next 12 months fell to 38 from 40, the lowest since February 2009 when the world economy was gripped by the credit crisis.

Only 17 percent of those surveyed expected their finances to improve, the lowest rate ever recorded.

"Consumers are going to be very hesitant to spend with such negative views of their personal finances," survey director Richard Curtin told Reuters Insider.

Still, the survey's barometer of current economic conditions rose to 74.5 from 68.7, better than a forecast of 68.0.

"It was certainly nice to see the current conditions index rise again, but all we did was retake some ground to where we were in July," said Tom Porcelli, senior U.S. economist at RBC Capital Markets in New York.

Separately, a report from the Federal Reserve showed the level of U.S. household debt compared with after-tax income fell in the second quarter to the lowest since 2004, a trend that could lay the groundwork for greater consumer spending.

At the same time, corporate cash hoarding rose to a record high during the period, a sign companies remain leery about the future.

Investors are now turning their attention to next week's Fed meeting. The central bank is expected to unveil new measures to bolster growth, though analysts expect the Fed will only be able to take modest steps.

The economy is struggling to regain momentum after barely growing in the first half of the year.

"I don't think this report is important for the Fed meeting next week, but I do think the overall lack of consumer confidence will be very important," said Porcelli.

Data earlier in the week emphasized the view that the Fed will take a modest track. New claims for jobless benefits unexpectedly rose last week, and factory activity along much of the Eastern seaboard contracted in September, but industrial output and consumer prices rose last month.

A new jobs-creation package from President Barack Obama is also facing opposition, suggesting it is unlikely to emerge from Congress in its current form.

There was muted reaction in financial markets immediately following the data with U.S. stocks little changed in a choppy session.

Two bellwether U.S. companies expressed confidence in the economy on Thursday.

United Parcel Service Inc said the company was on track for record results this year despite the economy's "bumpy ride". General Electric Co's chief executive said he sees "good, decent economic growth everywhere.

The survey's one-year inflation expectation rose to 3.7 percent from 3.5 percent, while the survey's five-to-10-year inflation outlook was at 3.0 percent from 2.9 percent.

Separate data showed a measure of future U.S. economic growth was little changed in the latest week, while the annualized growth rate fell to its lowest level in a year.

The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index dipped a hair to 122.4 in the week ended September 9 from 122.5 the week before. That was originally reported as 123.0.

The index's annualized growth rate slumped to minus 7.1 percent from minus 6.6 percent to fall to its lowest level since mid-September 2010.

(Additional reporting by Emily Flitter in New York and Jason Lange in Washington; Editing by Padraic Cassidy and Diane Craft)