Mixed Signals: Consumer Sentiment Jumps, But Spending Stagnant

U.S. consumer sentiment jumped to its highest level this month since May, but Americans have restrained from increased spending, according to two surveys released today that didn’t quite meet expectations.
The U.S. Commerce Department said consumer spending only rose 0.1 percent in August after adjusting for inflation. That followed a 0.4 gain in July.
Consumers apparently felt apprehensive in the wake of rising gasoline prices and stagnant income. Consumer spending is the biggest contributing factor in an economic recovery.
Americans found it difficult to spend more as personal income also grew by 0.1 percent. Disposable personal income — wages minus income taxes — fell by an inflation-adjusted 0.3 percent.
However, consumer sentiment has surged to its highest level in four months, according to the Thomson Reuters/University of Michigan’s index.
Its final reading on consumer sentiment increased to 78.3 from 74.3 in August, the highest point since May.
Still, the index did not meet economists’ forecasts for 79, according to a Reuters poll.
Consumer expectations jumped to 73.5 from 65.1, also the highest since May.
More consumers expected the unemployment rate to fall than to rise. Moreover, twice as many survey respondents expected economic growth than those that anticipated a downturn.
Gains in home values and stock prices have also helped bolster confidence and sentiment among households with incomes below $75,000, which was at its highest level since 2007.

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