[ForexNews]

The index of University of Michigan consumer sentiment increased to 65.7 in the final August survey from 63.2 in the preliminary report, higher than consensus expectations of 64.0 but still slightly below the July reading of 66.0. The current economic conditions component increased to 66.6 from 64.9 and the index of expectations climbed to 65.0 fro 62.1. One of the most significant improvements was in labor market conditions; in August, reported job losses were less than half of those recorded six months ago. However, the financial situations of respondents remain weak. Only 16% of all consumers reported that their finances had improved, the smallest proportion in the history of the survey. On the inflation front, one-year ahead median inflation expectations remained unchanged at 2.8% while the five-year ahead median inflation expectations edged lower to 2.8% from 2.9% in the preliminary survey. Although the improvement in confidence is encouraging, the sentiment index is still far below the pre-recession highs within the 80 to 90 range. Analysts look for confidence to increase further as the economic contraction abates and consumers improve their employment and financial situations in the next few quarters.