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Consumer sentiment bounces in August

Consumer sentiment bounces in August

08/29/2014

By Ruth Mantell, MarketWatch

WASHINGTON (MarketWatch) -- A gauge of consumer sentiment rose this month, reversing a drop in July, as views on the current economy brightened, according to data released Friday.

The University of Michigan/Thomson Reuters consumer-sentiment index hit a final August reading of 82.5, compared with a final July level of 81.8. had expected a final reading of 80.1 for August, compared with a preliminary result of 79.2.

Economists follow readings on confidence to look for clues about consumer spending, the backbone of the economy. For context, the consumer-sentiment gauge averaged 86.9 over the year leading up to the recession.

Of note, while consumers' views on current economic conditions rose this month, their expectations declined, according to the UMich report. That finding echoes separate data released earlier this week showing that a consumer-confidence gauge from the Conference Board bumped up this month to the highest level in seven years, even as the outlook on the upcoming economy slightly worsened.

Elsewhere Friday, the government reported that consumer spending fell 0.1% in July -- the first drop in six months -- as income growth slowed down. The consumer-spending report echoes other recent data that showed July's retail sales, which are a major chunk of consumer spending, were the weakest in six months.

Even as employers are picking up the pace of hiring and job creation, weak wages are one of the factors holding back greater economic growth, analysts say. Consumers may also be unusually cautious now, having endured a protracted recovery following a punishing recession.

While some parts of the economy have made great strides in recent years, others, such as the housing market, are having a tougher time. And it's hard for workers to rest easy about the economy as the penalty for losing a job remains stiff: About one-third of the unemployed have been looking for a job for at least half a year.

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