Consumer Outlook Up More Than Expected in August

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Americans became more optimistic in the economy amid declining gas prices in August, marking the biggest jump in two years.

The Conference Board, a private research group, said Tuesday that its consumer confidence index rose to 56.9, up from a revised 51.9 in July. That's the largest gain since August 2006, and is ahead of the 53 expected by economists surveyed by Thomson/IFR.

It's also the second month in a row that sentiment improved, after a six-month slide since January — but it remains about half what it was a year ago.

The Conference Board's Present Situation Index, which measures shoppers' current assessment of the economy, declined to 63.2 from 65.8 in July. But the Expectations Index, which measures their outlook over the next six months, jumped to 52.8 from 42.7 in July

"Consumer confidence readings suggest that the economy remains stuck in neutral, but may be showing signs of improvement by early next year," Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement.

Falling gas prices helped boost consumers' gloomy mood, she said.

Franco added that declines in the Present Situation Index, both in term of business conditions and the labor market, appear to be moderating. She noted that an improvement in consumers' expectations suggest better times ahead. However, "overall readings are still quite low by historical standards and it is still too early to tell if the worst is behind us."

Economists and investors closely monitor consumer sentiment as consumer spending represents about two-thirds of all economic activity.

While economists say they can't underestimate the relief among consumers to see gas prices come down, Americans are still faced with a number of big economic challenges as they head into the crucial fall and holiday selling seasons, from a weak job market to tight credit conditions and a housing slump.

The Standard & Poor's/Case-Shiller U.S. National Home Price Index, a widely watched housing index, released Tuesday showed home prices dropping a record 15.4 percent during the quarter, compared to a year ago. But sales of new homes posted an unexpected gain in July as heavily discounted properties enticed cautious house hunters to become home buyers.