Consumer confidence rises but outlook still grim
NEW YORK |
NEW YORK (Reuters) - Consumer sentiment hit a three-month high in August as households chipped away at outstanding debt, though Americans were pessimistic about the future, a survey showed on Friday.
Separate reports on the manufacturing sector painted a mixed picture, with factory orders rising by more than expected in July but Midwest business activity slipping in August.
Manufacturing had been at the vanguard of the country's recovery from the 2007-2009 recession but has lost momentum in recent months as economic difficulty in Europe and beyond has sapped overseas demand for U.S. products.
U.S. consumers, though, were in a slightly better mood this month. The Thomson Reuters/University of Michigan's final reading on overall consumer sentiment for August rose to 74.3, its highest since May.
The survey's barometer of current economic conditions rose to 88.7 from 82.7, the highest since January of 2008.
Buying was bolstered by price discounts and low interest rates, the survey found. But the biggest source of optimism was tied to success in trimming debt.
"Rather than citing income changes, consumers were more likely to cite favorable shifts in the amount of their outstanding debt and the value of their assets," survey director Richard Curtin said in a statement.
However, the survey's gauge of consumer expectations fell to 65.1 from 65.6, the lowest level since December of 2001.
Half of those questioned said their financial situation was worse than it was five years ago and the majority anticipated no wage gains during the year ahead, the survey showed.
A separate survey earlier this week from the Conference Board showed consumer confidence hit its lowest level since November, partly due to higher gasoline prices.
Economists still expect the Federal Reserve to try to boost growth with more monetary stimulus. But while Fed Chairman Ben Bernanke said a weak labor market was a grave concern and that the bank would act if needed, he gave no indication in a speech on Friday that such action was imminent.
The Fed has already pumped $2.3 trillion into the financial system in recent years in two separate rounds of quantitative easing. The Fed will start its next policy meeting on September 12.
"This suggests that debate over QE3 is ongoing, and that no consensus has been reached," said Joshua Shapiro, chief U.S. economist at MFR, a global consulting firm.
Analysts said signs of improvement in recent economic data may be causing the Fed to hold its fire for now.
Data Friday showed new orders for factory goods jumped by the biggest margin in a year in July.
But the Institute for Supply Management-Chicago said its index of Midwest business activity fell in August, though new orders increased.
"You have a good strength in orders and employment, but the trouble is that Chicago(PMI) has its own motion and is not reflective of the national trend," said Pierre Ellis, senior global economist at Decision Economics in New York.
Other recent manufacturing indicators have indicated trouble in the sector. The Institute for Supply Management's monthly survey said U.S. manufacturing contracted for a second straight month in July.
(Editing by Dave Zimmerman)
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