Consumer confidence highest in 3 years

Confidence among U.S. consumers increased in February to the highest level in three years as a drop in unemployment helped overcome concern over rising food and fuel costs.

The rise in sentiment was a hopeful sign for the economic recovery after the government said Friday that growth in the fourth quarter was not as robust as it previously estimated.

The Commerce Department reported that the economy grew at a 2.8 percent annual rate in the fourth quarter, down from a prior estimate of 3.2 percent. Economists at JPMorgan lowered their forecast for first-quarter GDP growth to 3.5 percent from 4.0 percent, citing softer-than-expected consumer spending and possible headwinds from the oil price spike. Harsh winter weather is also seen as a factor weighing on growth.

The Thomson Reuters/University of Michigan final index of sentiment climbed to 77.5, exceeding the median forecast of economists surveyed by Bloomberg News, from 74.2 in January, a report Friday showed.

The survey showed that for the first time in six years, households this month said they had heard more optimistic than pessimistic news on the economy, boosting the odds that consumer spending will keep bolstering the expansion.

"We've clearly seen a bounce in the confidence numbers coincide with the gains in financial markets and the pickup in the economy, particularly the improving labor market," said Jim O'Sullivan of MF Global in Manhattan. "It was a bit of a surprise given the geopolitical tensions."

Combined news services