Consumer Confidence Surges on Cheaper Gasoline

Ann Arbor, MI, Sept. 12, 2008—Confidence among U.S. consumers rose the most in more than four years, fueled by a decline in gasoline prices.

The Reuters/University of Michigan preliminary index of consumer sentiment increased to 73.1 in September, the biggest increase since January 2004, from 63 in August. The measure averaged 85.6 in 2007.

Cheaper gasoline may prevent consumer spending from collapsing under the weight of mounting job losses and mortgage foreclosures. A government report Friday showed retail sales unexpectedly dropped in August as the spending boost from tax rebates faded.

Americans expect inflation to subside, the report showed. Prices will rise 3.6 percent in the coming 12 months, respondents to the survey said, compared with a 4.8 percent increase predicted a month ago.

The decline in gasoline prices from a record $4.11 in July is easing the strain on household budgets and leaving consumers more to spend on other goods. The average price of regular gasoline fell to $3.67 a gallon this week from an average $3.76 in August, according to AAA.

Economists had forecast the confidence index would rise to 64.

Another report Friday from the Labor Department said prices paid to U.S. producers fell 0.9 percent in August, the first decline this year. Falling energy prices are leading the declines.

The Michigan survey's index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, rose to 70.9 from 57.9 in the prior month.

A gauge of current conditions, which reflects Americans' perceptions of their financial situation and whether it is a good time to buy cars and other big-ticket items, climbed to 76.5 from 71.