Consumer sentiment hits five-month high

Consumer confidence rose to its highest in five months in August, posting an unexpectedly large recovery from depressed levels with the help of moderating energy prices, a survey released on Friday showed.

The Reuters/University of Michigan Surveys of Consumers said its final index of confidence for August rose to 63.0 — its highest since 69.5 in March. It was up from 61.2 in July and mid-August's preliminary reading of 61.7.

Economists had expected a reading of 62.0, according to the median of their forecasts in a Reuters poll. The 64 forecasts in the survey ranged from 60.5 to 64.0.

The index, which dates back to 1952, remains low overall, however, and still points to a difficult outlook for consumers. The index's record low was 51.7, which it hit in May 1980.

"Overall, the data still indicate that the pace of growth in consumer spending will fall back toward zero in the fourth quarter of 2008 and the first quarter of 2009," the Surveys of Consumers said in its report.

The report added that for the third consecutive month, the majority of consumers reported their financial situation had worsened.

"This was the first time worsening finances have been reported by the majority of consumers over a three-month period in the long history of the surveys," it said.

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On a brighter note, however, the index of consumer expectations rose to 57.9 — its highest since March's 60.1 — from 53.5 in July.

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The one-year inflation expectations gauge fell to 4.8 percent from July's 5.1 percent, which was the biggest one-month drop since September 2006. The index of five-year inflation expectations held steady at 3.2 percent.

Much of consumers' evaluation of inflation has been linked to energy prices, where a great degree of uncertainty remains.

"Although the expected change in gas prices during the year ahead plunged August, consumers still anticipate sizable gains in gas prices over the next five years," the report said.