Consumer confidence jumps up

The consumer confidence index had the largest gain since August 2006.

NEW YORK (AP) — Americans felt better about the economy in August, as a barometer of sentiment posted the biggest boost in two years amid falling gas prices. Two reports suggested that a bottom could be nearing for the housing market, but economists caution it’s too early to proclaim that the worst is over.

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, and worries about the job market persisted.

“It’s still too early to call a bottom” on both confidence and housing, said Gary Thayer, senior economist at Wachovia Securities.

The Standard Poor’s/Case-Shiller U.S. National Home Price Index released Tuesday showed home prices dropped a record 15.4 percent during the second quarter. However, the rate of single-family home price declines slowed from May to June, a possible silver lining.

Sales of new homes rose in July, but still fell short of economists’ expectations, and home prices continued to sink. Still, the July increase followed a sharp downward revision to June’s sales.

“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. 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.

Falling gas prices in recent weeks helped boost consumers’ mood, Franco said. Despite that, gas nationally was almost 95 cents a gallon higher than a year ago, and the volatility in oil prices is a big concern for investors.

The Conference Board’s index that measures shoppers’ current assessment of the economy declined to 63.2 from 65.8 in July. But the one that gauges their outlook over the next six months jumped to 52.8 from 42.7 in July. The 10-point increase marked the biggest gain since November 2005, when the economic fallout of Hurricane Katrina was subsiding.

Franco said that declines in the Present Situation Index, both in term of business conditions and the labor market, appear to be moderating.

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

The Consumer Confidence report — derived from responses received through Aug. 19 of a representative sample of 5,000 U.S. households — showed people’s current assessment of the labor market turned bleaker.