oops consumer confidence in us increased to 104 5

oops . not the sort of stuff to bring rates down, as expected by some.
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Consumer Confidence in U.S. Increased to 104.5 in September

By Bob Willis

Sept. 26 (Bloomberg) -- Confidence among U.S. consumers rebounded more than forecast in September from a nine-month low as Americans paid less at the gasoline pump.

The Conference Board's index of sentiment rose to 104.5 this month from 100.2 in August, the New York based research group said. More consumers said jobs were plentiful and more said they expected their incomes to increase in coming months.

Improved confidence and a still-strong labor market may help bolster spending, which accounts for about two-thirds of the economy, even as the housing market falters. Almost 1 in 3 Americans said lower fuel prices have allowed them to spend more on other goods, according to a recent Bloomberg/Los Angeles Times survey.

``We've had an entire month of free-falling gasoline prices, something that affects consumer attitudes,'' Ellen Zentner, economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. ``We're expecting a pop in consumer spending in the third quarter.''

Economists forecast a reading this month of 103, according to the median estimate if a Bloomberg News survey of 65 economists. Estimates for the index ranged from 97 to 107. A preliminary University of Michigan report on Sept. 15 showed consumer sentiment rose this month for the first time since June.

The Conference Board surveys 5,000 households, usually by the middle of each month.

The gauge of expectations for the next six months rose to 89 in September from 84.4 a month earlier. Optimism about consumers' present situation increased to 127.7 this month from 123.9 in August.

Inflation Expectations

Americans' expectations for the inflation rate 12 months from now fell to 4.9 percent in September from 5.5 percent in August. It reached a high this year of 5.6 percent in May.

Consumers were more optimistic about the labor market six months from now, suggesting consumer spending may pick up after slowing in the second quarter.

The share of people expecting better employment opportunities in the next six months rose to 14.4 percent from 14.2 percent. The proportion of people surveyed who expect their incomes to rise was 19.7 percent, the highest since January, after 17.9 percent.

The share of consumers who said jobs are currently plentiful rose to 25.9 percent from 24.5 percent in August.

Declining prices at the pump gave Americans something to cheer about this month. Regular unleaded gasoline fell to $2.44 a gallon at the end of last week, compared with an average of $2.94 in August, according to American Automobile Association data.

Bush's Approval Ratings

Falling fuel costs have helped give a boost to President George W. Bush's approval ratings. The Bloomberg/Los Angeles Times poll showed that 54 percent of Americans said the economy is doing well. That's up 4 percentage points from the beginning of August. Bush's approval rating on his handling of the economy increased to 43 percent from 38 percent.

The poll of 1,517 adults was taken Sept. 16 to Sept. 19 and had a margin of sampling error of plus or minus 3 percentage points.

`We're seeing consumer psychology improve over the last month or so,'' said Clarence Otis, chief executive officer of Darden Restaurants Inc. the Orlando, Florida-based operator of Red Lobster and Olive Garden chains. The company on Sept. 19 raised its earnings forecast for the year.

The economy is also creating jobs and providing more income. Wages increased at an annual rate of 7.6 percent in the second quarter after a 13 percent surge in the previous three months, the government reported Aug. 30. Job growth has averaged 140,000 a month this year, strong enough to hold unemployment near a five-year low.

Stock Prices

Higher stock prices also boosted confidence this month, economists said. The Standard & Poor's index of 500 stocks rose almost 2 percent for Aug. 23 through Sept. 20.

Limiting confidence has been a slump in the housing market. Declining sales has prompted sellers to lower prices. The National Association of Realtors said yesterday that the median price of a previously owned home fell in August. The 1.7 percent drop from the same month last year was the first since April 1995.

Falling home values may make homeowners feel less wealthy and prompt them to slow their spending, posing a risk to the economy. The end of the five-year housing boom also makes it harder for owners to extract equity, a source of cash for consumer spending.

Spending Forecast

Spending in the next three quarters may grow at a 2.6 percent annual rate, according to the median forecast in a recent Bloomberg survey, compared with an average 3.7 percent over the last decade.

A slowing of economic growth prompted Federal Reserve policy makers last week to leave interest rates unchanged for a second month. It's also led to lower yields on Treasury securities. The yield on the benchmark 10-year note has declined by more than two-thirds of a percentage point from a June 28 peak of 5.25 percent.

To contact the reporter on this story: Bob Willis in Washington at [email protected]

Last Updated: September 26, 2006 10:00 EDT