Consumer Sentiment Rises Slightly

Economists Still Warn Major Uptick In 2012 Purchasing Is Unlikely

Consumer Sentiment Rises SlightlyHitting a three-month high, consumer sentiment unexpectedly increased in early August, according to an index released by the University of Michigan and Thomson Reuters (UM/TR). In its preliminary August reading, the UM/TR index rose to 73.6, up from a final July level of 72.3. Still, while economists see the results as a positive sign, they warn a major uptick in 2012 purchasing is unlikely.

"Although the growth rate in personal consumption expenditures can be expected to rebound from the second-quarter lull, growth can be expected to remain just under 2% to the end of the first quarter of 2013," said Richard Curtin, who directs the UM/TR survey.

Respondents were particularly optimistic about the economy, as a measure of current conditions jumped to 87.6 – the best reading in this category since January of 2008. Yet, data shows the outlook of consumers is dramatically more subdued, as the expectations index fell to 64.5, slipping to its lowest point since last December. Cramping the confidence of Americans, the majority of U.S. households expect no increase in their incomes during the next 12 months, while about 25% believe the unemployment rate will rise.

Concerns about inflation are increasing as well, as the record drought across the U.S. Midwest continues to make headlines. The one-year inflation expectation hit 3.6%, up from 3% in recent readings, as consumers worry that food prices may spike. The five-to-10-year inflation outlook also rose by 0.3%, reaching 3% overall.