U.S. Consumer Confidence Index Rises More Than Forecast to 56.9

By Timothy R. Homan

Aug. 26 (Bloomberg) -- Consumer confidence in August increased more than forecast in August as cheaper gasoline improved Americans' moods, a private report showed.

The Conference Board's confidence index rose to 56.9 from 51.9 in July. A separate report showed home prices dropped at a slower pace in the second quarter.

A weakening labor market, falling home prices and higher inflation may curb consumer spending for the remainder of the year even as gasoline prices have fallen during the last six weeks. The confidence report does little to ease concern that economic expansion will slow after the effects of the federal tax rebates fade.

``If gasoline prices come down somewhat further, it'll be nice, but I don't think it'll be able to offset further job- market concerns in the eyes of consumers,'' Russell Price, a senior economist at H&R Block Financial Advisors Inc. in Detroit, said before the report.

The New York-based Conference Board's confidence index was forecast to climb to 53, from a previously reported 51.9 for July, according to the median estimate of 70 economists surveyed by Bloomberg News. Projections ranged from 50 to 56.1. June's reading of 51 was the lowest since February 1992.

Home-Price Index

The S&P/Case-Shiller home-price index showed home values declined 2.3 percent in the three months through June from the previous three months, compared with a 6.8 percent drop in the first quarter.

The Reuters/University of Michigan preliminary index of consumer sentiment for August increased less than forecast to 61.7 from 61.2, according to a report earlier this month. The measure averaged 85.6 last year.

Labor markets have a greater weight in the Conference Board's report than they do in the University of Michigan's, economists said.

The share of people telling the Conference Board that jobs are hard to get increased to 32 percent, the highest since October 2003, from 30.2 percent in July. Those saying jobs were plentiful declined to 13.1 percent this month from 13.6 percent.

The share of respondents expecting fewer jobs in six months decreased to 30.6 percent from 37.3 percent.

The outlook for incomes was little changed. The proportion of people who expect their incomes to rise over the next six months increased to 14.7 percent from 14.3 percent last month, according to today's report. The gauge fell to a record-low 13.1 percent in June. Records began in 1967.

Payroll Report

Economists forecast the Labor Department will report on Sept. 5 that the U.S. lost jobs in August for an eighth straight month.

The Conference Board's measure of present conditions decreased to 63.2 in August from 65.8 in July. A gauge of expectations for the next six months rose to 52.8 from 42.7 the prior month, the report showed.

Buying plans over the next six months increased for automobiles and major appliances. More Americans said they would consider buying a home than in July.

The average cost of a gallon of regular gasoline peaked at $4.11 on July 16, according to AAA. Prices yesterday were $3.67 a gallon.

Consumer spending probably will slow as the effects of the rebate checks diminish. Economists surveyed by Bloomberg earlier this month projected spending, which has grown every quarter since 1992, will stall in the last three months of the year.

Commerce Department figures released this month show retail sales in July fell for the first time in five months, signaling the boost from the tax rebates may already be fading.

Some companies are feeling the combined effects of the worst housing slump in a quarter century and a drop-off in consumer spending. Home Depot Inc., the world's largest home- improvement retailer, last week forecast a 24 percent earnings decline for the year.

Chief Executive Officer Frank Blake said in a statement that the Atlanta-based company sees ``pressure on our market and the consumer.'' Second-quarter sales fell 5.4 percent, the seventh decline in the past eight quarters.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net