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A measure of U.S. business activity rose more than forecast in August, adding to signs that the economy may be entering a recovery.

The Institute for Supply Management-Chicago Inc. said today its business barometer increased to 50, the highest level since September, from 43.4 in July. Readings below 50 signal a contraction.

Automakers are likely to be at the epicenter of a rebound in manufacturing over coming months as assembly lines speed up after the government’s “cash-for-clunkers” plan left dealer lots bare. Increasing demand from overseas and a record reduction in inventories mean a pickup in factory orders and production may last for much of the rest of the year.

“The manufacturing sector is sparking back to life,” Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce in Toronto, said before the report. “It’s not just cash-for-clunkers, auto plants were already scheduled to be coming back online and that creates additional demand for steel and parts.”

Economists surveyed by Bloomberg News forecast the index would rise to 48, according to the median of 53 projections. Estimates ranged from 46 to 52.5.

Economists watch the Chicago index for an early reading on the outlook for overall U.S. manufacturing, which makes up about 12 percent of the economy. The Institute for Supply Management is scheduled to release its August factory report tomorrow. According to a Bloomberg survey, that measure will show expansion for the first time since January 2008.

Other reports this month also showed manufacturing improving. The Philadelphia and New York Federal Reserve Banks’ economic indexes expanded this month for the first time since September and April 2008, respectively.

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Poland’s economic growth will be at least 0.7 percent this year and will sustain that rate or accelerate in 2010, Finance Minister Jacek Rostowski said.

“GDP growth won’t be less than 0.7 percent in 2009, although we hope for more,” Rostowski said today in comments confirmed by ministry spokeswoman Alina Guzinska by telephone. “In 2010, economic growth will at least match that in 2009.”

The forecast compares with a July government projection of 0 car loan.2 percent growth this year and 0.5 percent in 2010.

Poland’s economy expanded by an annual 1.1 percent in the second quarter, according to data published by the Central Statistical Office yesterday. That makes it the European Union’s only eastern member to escape a recession since the credit crisis began.

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Omani inflation slowed to a four year low of 1.8 percent in July, the economy ministry said today, without giving a breakdown of the consumer price index.

The inflation rate fell from 2.9 percent in June, the ministry said on its Web site. Inflation in the Sultanate was last below 1.8 percent in August 2005, according to Bloomberg data compiled from the ministry.

Inflation in the Gulf Cooperation Council has slowed after oil prices plummeted from July 2008’s peak of $147.27 a barrel. The U.S. dollar, to which Oman’s currency is pegged, has also strengthened, making imports cheaper. Gulf states are also seeing a drop in real estate prices, with the most notable decrease in the United Arab Emirates, where prices in Dubai have halved.

The U.A.E. and Qatar will see the greatest reversal in inflation trends from the highest regional rates last year to deflation this year, Monica Malik, an economist at EFG-Hermes, said in a report on Aug. 26.

The GCC is an economic and political bloc including the U.A.E., Saudi Arabia, Kuwait, Qatar, Bahrain and Oman.

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U.K. house prices rose at their fastest pace in more than 2 1/2 years in August as low interest rates spurred demand and a lack of properties for sale underpinned values, Nationwide Building Society said.

The average cost of a home climbed 1.6 percent, the most since December 2006, to 160,224 pounds ($260,000), the mortgage lender said in a statement today. Economists predicted an increase of 0.5 percent, according to the median of 17 forecasts in a Bloomberg News survey. From a year earlier, prices fell 2.7 percent.

The Bank of England this month kept the benchmark interest rate at 0.5 percent and extended its asset-purchase program to pull Britain out of its worst recession in a generation. Today’s report adds to evidence the housing market may be stabilizing.

While lack of supply may be pushing up prices, “demand for homes is also firming on the back of a gradual improvement in mortgage availability and the brighter economic outlook,” said Nick Kounis, an economist at Fortis Bank Nederland Holding NV in Amsterdam. “The main message from the Nationwide report is that the recovery in house prices is picking up steam.”

The increase in house prices this month was the fourth in succession, leaving them 3.2 percent higher than at the end of 2008, according to Nationwide. In the three months through August, they rose by an average of 3.3 percent from the previous period, the most since February 2007.

House prices are still down 14.4 percent from their peak in October 2007, the mortgage lender said.

Mortgage Approvals

“Even though house prices remain high relative to earnings, the fall in interest rates has improved the affordability of mortgages for those looking to buy a home,” Martin Gahbauer, Nationwide’s chief economist, said in the statement. “The fall in debt servicing costs has meant that fewer homeowners are under immediate financial pressure to sell.”

Britain’s six biggest banks approved more home loans in July, a sample from the Bank of England’s lending panel showed on Aug. 20. U.K. mortgage approvals rose in July to the highest level since February 2008, the British Bankers’ Association said this week.

Recent house price increases may “become difficult to sustain” if efforts to spur economic growth are successful and lead the U.K. central bank to raise interest rates, Nationwide said.

“At the moment, a rise in interest rates is probably still some way off,” Gahbauer said. “However, the eventual exit from exceptionally loose monetary policy could make the recovery in the housing market bumpier than some might expect after the last few months of price increases.”

The economic slump is also keeping a lid on workers’ pay. The median pay award in the country was for a 1 percent increase in the three months to July, Incomes Data Services said in a separate report today. The report was based on a survey of 75 settlements covering more than 500,000 employees.

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German business confidence rose for a fifth month in August, suggesting Europe’s largest economy will gather strength after shaking off its worst recession since World War II.

The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, increased to 90.5 from 87.4 in July. That’s the highest reading since September last year. Economists expected a gain to 89, the median of 41 forecasts in a Bloomberg News survey showed. The index reached a 26-year low of 82.2 in March.

Germany’s economy unexpectedly expanded 0.3 percent in the second quarter as improving global trade boosted demand for exports and the government’s 85 billion-euro ($122 billion) package to stimulate domestic spending started to kick in. Bundesbank President Axel Weber said last week that, while he’s “not yet convinced” the recovery can be sustained, third- quarter growth may be “better than thought.”

“The third quarter has all ingredients for another growth surprise,” said Carsten Brzeski, an economist at ING Group in Brussels. “The German economy steered out of recession faster than some pessimists had thought. However, any credit crunching and job shedding are clear speed limits to the recovery.”

The euro rose a quarter of a cent on Ifo’s report before easing back to $1.4308 at 10:50 a.m. in Frankfurt. The yield on the 10-year German benchmark bond fell three basis points to 3.25 percent.

Expectations Jump

Ifo’s measure of expectations increased to 95 from 90.4, while a gauge of current conditions rose to 86.1 from 84.4. Investor confidence jumped to the highest level in more than three years this month and the benchmark DAX share index reached an 11-month high yesterday.

German Chancellor Angela Merkel’s government, which faces a national election in September, is trying to rekindle growth with a spending package that includes tax breaks and a 2,500- euro payment for consumers who scrap their old car and buy a new one. The Economy Ministry has indicated its forecast for a 6 percent economic contraction this year may now be too pessimistic.

“Minus 6 percent is too negative,” Ifo economist Gernot Nerb said in an interview with Bloomberg Television. Rising expectations among exporters indicate manufacturing should improve, he said.

Fiscal Stimulus

BASF SE, the world’s biggest chemical company, said on Aug. 20 that demand is stabilizing and it has fewer employees at its main German plant on shortened working hours.

Volkswagen AG this month raised its full-year sales forecast after the “cash-for-clunkers” program helped spur demand for its Golf and Polo compacts. Deliveries may fall 5 percent this year, half the decline previously estimated, Europe’s largest carmaker said.

“The fiscal stimulus measures expire next year, that’s the problem,” said David Kohl, deputy chief economist at Julius Baer Holding AG in Frankfurt.

The Bundesbank expects unemployment to rise to 10.5 percent in 2010 from 8.3 percent today as companies cut costs to restore profit. That may damp consumer spending and undermine the recovery.

European Central Bank policy makers have stressed the heightened degree of uncertainty over the economic outlook and indicated they won’t rush to withdraw emergency measures to prop up the economy.

The ECB has cut its benchmark interest rate to a record low of 1 percent, flooded banks with cash and started buying 60 billion euros of covered bonds in an effort to revive lending.

“We see some signs confirming that the real economy is starting to get out of the period of freefall,” ECB President Jean-Claude Trichet said at the U.S. Federal Reserve’s annual symposium in Jackson Hole, Wyoming, on Aug. 22. This “does not mean at all that we do not have a very bumpy road ahead of us.”

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The number of states posting a decrease in the unemployment rate in July more than tripled from the previous month, according to a government report released Friday.

The Labor Department said 17 states and the District of Columbia reported a drop in unemployment rates in July, compared with 5 states in June.

Increases in unemployment rates were reported in 26 states, and 7 states posted no change from the previous month.

While the report showed improvement for the battered labor market, the changes in unemployment rates were very modest across the board: overall, unemployment rates didn’t change much from June to July.

Only two states, Vermont, at 0.5 percentage point, and Minnesota, at 0.3 point, showed what were considered significant decreases in unemployment rates.

California lost the most jobs in July, shedding 35, 800 jobs, due to its large size. North Carolina lost 26,400 jobs, Florida lost 25,200 jobs and Illinois shed 13,000 jobs.

Compared to the same time last year, all 50 states and the District of Columbia posted higher unemployment rates, with 15 states having double-digit unemployment percentages.

Michigan had the highest unemployment rate at 15%, but that was down 0.2 percentage point from June. Michigan has been especially hard hit by the collapse of the U.S. auto industry and the housing meltdown.

Rhode Island posted the second highest unemployment rate at 12.7% and Nevada rounded out the top three with a 12.5% rate.

Four states — California at 11.9%, Georgia at 10.3%, Nevada at 12.5%, and Rhode Island at 12.7% — posted record high jobless rates.

The national unemployment rate fell to 9.4% from 9.5% in June, the first decline in that closely watched reading since April 2008.  

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The global economy may be coming out of the worst recession since World War II as record-low interest rates and trillions of dollars in fiscal stimulus spur demand.

Sales of existing U.S. homes jumped in July to the highest level since August 2007, and German service industries expanded this month for the first time in almost a year, reports yesterday showed. The Japanese economy grew for the first time in five quarters, according to a report earlier this week.

“There is no question the global economy is healing and emerging from recession,” Kenneth Rogoff, a Harvard University professor and former chief economist for the International Monetary Fund, said in a Bloomberg Television interview yesterday.

Federal Reserve Chairman Ben S. Bernanke and other global policy makers cautioned that the recovery is likely to be muted, indicating they would not soon remove all the stimulus injected into the financial system.

“Strains persist in many financial markets across the globe,” Bernanke said in a speech yesterday at the Kansas City Fed’s annual symposium in Jackson Hole, Wyoming. “The economic recovery is likely to be relatively slow at first, with unemployment declining only gradually from high levels.”

The U.S. housing market, which led the way into the recession, is showing signs of righting itself after almost four years of declines. The 7.2 percent rise in sales of existing homes last month was the biggest since the National Association of Realtors began keeping records in 1999.

Housing Stabilizes

U.S. stocks gained for a fourth day, sending the Standard & Poor’s 500 Index to the highest level since October. The S&P 500 added 1.9 percent to 1,026.13, giving it a 2.2 percent advance this week. The dollar and Treasuries fell, while oil rose to a 10-month high.

The news yesterday followed a report earlier in the week that single-family housing starts rose in July for the fifth consecutive month to reach the highest level since October.

“Although some of our markets are still stuck in the mud, many are improving,” Robert Toll, Chairman and Chief Executive Officer of Toll Brothers Inc., told Wall Street analysts on Aug. 12. “It does feel as if the fence sitters are looking for reasons to jump in on the side of buying.” Horsham, Pennsylvania-based Toll is the largest U.S. luxury homebuilder.

Demand has been boosted by government tax credits for first-time buyers and near record-low borrowing costs engineered by the Fed, which has coupled a cut in its benchmark interest rate to near zero with purchases of mortgage-backed securities.

The index of U.S. leading economic indicators, which is supposed to presage activity three to six months ahead, rose in July for a fourth consecutive month, the New York-based Conference Board reported on Aug. 20.

German Sentiment

In Germany, Europe’s largest economy, “business sentiment among service providers strengthened in August and was the most positive since January 2006,” Markit Economics said yesterday, pointing to its purchasing managers’ survey absolutely free credit report.

“The recession is over,” said Klaus Baader, chief European economist at Societe Generale SA in London, who called the Markit data an “incredible reading.”

German investors are also upbeat. Their confidence jumped to its highest level in more than three years in August, the Mannheim, Germany-based ZEW Center for European Economic Research said on Aug. 18.

Chancellor Angela Merkel, who faces national elections next month, is spending about 85 billion euros ($122 billion) in an effort to rekindle economic growth, including a 2,500-euro payment for consumers who scrap an old car and buy a new one. New-vehicle registrations in Germany rose 23 percent in the first five months of 2009 from the year-earlier period.

Japanese GDP

Japan’s economy is also being boosted by government measures ahead of an election. Prime Minister Taro Aso, whose party is trailing in opinion polls before the Aug. 30 parliamentary elections, has put forward a 25 trillion yen ($265 billion) stimulus plan.

The 3.7 percent rise in Japanese gross domestic product in the second quarter followed an 11.7 percent contraction in the first three months of the year. Exports led the revival of the world’s second-largest economy last quarter, jumping by 6.3 percent.

The IMF may increase its forecast for the global economic rebound next year as signs of growth return, John Lipsky, the fund’s first deputy managing director, said yesterday.

The Washington-based lender last month predicted the world economy will expand 2.5 percent in 2010 after contracting 1.4 percent this year.

Recovery ‘Anticipated’

“We’re on track in broad terms for the kind of recovery we had anticipated,” Lipsky said in a Bloomberg Television interview from Jackson Hole. “But to get that recovery requires continued policy effort — accommodative monetary policy, stimulative fiscal policy — to make sure that growth shows up.”

European Central Bank President Jean-Claude Trichet sounded a similar note, telling the Jackson Hole conference that it’s too soon to say a recovery can be sustained and that policy makers need to maintain efforts to restore confidence.

“We know that we have an enormous amount of work to do and we should be as active as possible,” Trichet said. The ECB has cut its benchmark interest rate to a record 1 percent and is buying covered bonds and flooding banks with money.

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The host for central bankers attending the Federal Reserve conference this weekend to discuss the financial crisis is a regional Fed chief who’s making waves with his proposal for letting big U.S. banks fail.

Thomas Hoenig, the Kansas City Fed president, will welcome Fed Chairman Ben S. Bernanke, European Central Bank President Jean-Claude Trichet and dozens of other central bankers to the annual symposium in Jackson Hole, Wyoming, starting today. Hoenig said he hopes the gathering will serve as a model for handling crises in the future.

Bernanke has urged Congress to back part of Hoenig’s proposal for dealing with faltering big banks, which would wipe out shareholder equity in any that receive government aid. The Treasury Department’s so-called resolution authority plan, while likely to result in stockholder losses, doesn’t require it.

“Tom is leading the mainstream on this,” said former Fed Governor Lyle Gramley, now senior economic adviser with New York-based Soleil Securities Corp. “He’s ahead of the curve.”

Hoenig, 62, took office in 1991 and is soon to be the longest-serving Fed policy maker. Out of the 12 regional Fed presidents, he is one of two to have served as a head of bank supervision. Hoenig is tougher than his colleagues on inflation, having dissented from interest-rate votes four times since 1995, always for tighter policy.

Alternative to Bailouts

Companies with weak capital or investor confidence shouldn’t be bailed out, Hoenig said in a private talk in Omaha, Nebraska, in March. He said the government instead should declare them insolvent, replace managers, remove the bad assets and require shareholders to take losses. Hoenig broke from his usual practice of speaking from notes on index cards for non- economic comments and released written text entitled “Too Big Has Failed.”

Senator Sam Brownback of Kansas asked for a copy of the speech after reading a newspaper article about it. He invited Hoenig to testify at an April hearing of the Joint Economic Committee, where Brownback is the ranking Senate Republican. Brownback said he had received “huge numbers of calls” from constituents angry about bank bailouts.

“Tom putting it out there, said, ‘You’re frustrated and you’re mad and there’s a way to address it,’” Brownback said in an interview. “It gave it, I think, a realistic, regulator approach from a respected individual.” He said he would like Hoenig to address lawmakers again this year.

The debate has been fueled by multibillion dollar government rescues of financial companies including Citigroup Inc. and American International Group Inc. Lawmakers in line with Hoenig include Alabama Senator Richard Shelby, the top Republican on the Banking Committee.

Shifting Risk

“Our regulatory reform effort must place the risk back where it belongs, on the risk takers and not on the taxpayers,” Shelby said in a statement.

Bernanke echoed Hoenig’s views in recent congressional testimony. In July 24 remarks to the House Financial Services Committee, the Fed chief indicated support for the Treasury’s resolution plan while adding that Congress might want to add some constraints such as requiring shareholders to bear losses.

“People are starting to sit up and take notice of his remarks,” said Camden Fine, president of Independent Community Bankers of America, a Washington-based trade group. “It’s influencing the debate.”

Not everybody agrees with Hoenig’s recommendation of setting strict guidelines to handle financial failures.

“You have to trust the authorities with some ability to change the rules when they need to,” said William Isaac, former head of the Federal Deposit Insurance Corp car insurance. and now chairman of the global financial services unit of LECG Corp., an economic and financial consulting company based in Emeryville, California.

Vigorous Debate

While Hoenig’s plan may not be covered in the formal discussions at Jackson Hole, his fingerprints extend past the brief remarks he delivers: Hoenig approves topics and speakers, with an eye to fostering debate.

“It has to be vigorous,” Hoenig said during an interview in a conference room next to his 14th-floor office at the bank’s new limestone-and-glass headquarters building in Kansas City. “I don’t think we’ll get better if we don’t listen to our critics as well as to those who praise us.”

Scheduled speakers include Bernanke tomorrow, along with Trichet, Bank of Japan Governor Masaaki Shirakawa, and less- well-known professors such as Carl Walsh of the University of California at Santa Cruz and Ricardo Caballero, chairman of the Massachusetts Institute of Technology’s economics department.

“I’m hoping that this becomes, in a sense, a lessons- learned and a beginning of a blueprint,” Hoenig said.

Roots in Iowa

Thomas Michael Hoenig grew up in Fort Madison, Iowa, the second of seven children of a plumber and homemaker. After being drafted into the Army and serving in Vietnam, he completed graduate studies in economics at Iowa State University in Ames. Unlike most students, Hoenig was ready with his dissertation topic, bank competition.

“He decided what he wanted to write his dissertation on and came in and told me,” recalled Dudley Luckett, a retired professor who was Hoenig’s adviser.

Hoenig joined the Kansas City Fed as an economist in 1973. He played basketball there with another young economist, Donald Kohn, who’s now the central bank’s vice chairman.

One of Hoenig’s defining experiences occurred in 1982, when he was on the front lines during the failure of Oklahoma City’s Penn Square Bank, which triggered a national banking crisis and helped precipitate the 1984 government takeover of Continental Illinois National Bank & Trust Co.

Principles Approach

“We learned lessons about concentrations of credit,” Hoenig said. That and subsequent events helped shape his view that setting hard rules for banks was better than the so-called principles-based approach, which favors wide-ranging edicts such as treating customers fairly. The U.K.’s financial regulator held itself out as a principles-based regulator until this year.

“There’s nothing in this crisis that I haven’t seen before,” Hoenig said.

Warning about dangers posed by big banks isn’t new for Hoenig. In a 1999 speech, Hoenig said the rise of “mega financial institutions” created a risk of a “less stable and a less efficient financial system” because the government would be reluctant to close troubled companies, creating implicit guarantees for some depositors and creditors.

Hoenig will become the longest-serving Fed policy maker this year when Minneapolis Fed President Gary Stern, who has also made a name studying too-big-to-fail, retires.

“I don’t ever recall him being so vocal on a subject like this,” said Douglas Lee, who runs Economics from Washington, a consulting firm in Potomac, Maryland. “He will certainly be a voice that will be listened to.”

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U.S. banks tightened standards on all types of loans in the second quarter and said they expect to maintain strict criteria on lending until at least the second half of 2010, a Federal Reserve report showed today.

“Domestic banks indicated that they continued to tighten standards and terms over the past three months on all major types of loans to businesses and households,” the Fed said in its quarterly Senior Loan Officer survey. “The net percentages of banks that tightened declined compared with the April survey.”

The report suggests that lenders and borrowers are wary of taking on more risk until the U.S. economy shows clear signs of growth. Most banks expected standards across all loan categories “would remain tighter than their average levels over the past decade until at least the second half of 2010,” the report said.

“Consumer and commercial borrowers have clamped down,” Kevin Fitzsimmons, a managing director at Sandler O’Neill & Partners LP in New York, which specializes in bank research, said before the report. “You just need some economic growth to materialize and then you will see more lending.”

The Fed report said that demand for loans continued to weaken “across all major categories” except prime residential mortgages. Banks cited falling demand and credit quality as the primary reasons for decreases in commercial and industrial lending, according to the central bank.

Some 55 U.S. banks and 23 U.S. branches of foreign banks were surveyed by the Fed between July 14 and July 28.

Home Mortgages

Total home mortgages were nearly unchanged in the first quarter compared with the final quarter of 2008 at $10.4 trillion, according to the Fed’s second-quarter Flow of Funds report. Consumer credit decreased at an annual rate of 5.25 percent in the second quarter, the Fed said Aug. 7 in a separate release.

“After holding nearly flat in the April survey, the net percentage of domestic banks that tightened standards on prime residential real estate loans fell to roughly 20 percent,” the loan officer survey said. “The net fraction of respondents that tightened standards on nontraditional residential mortgages fell to roughly 45 percent, from 65 percent in April.”

The Fed today extended by three to six months an emergency program aimed at restarting credit markets, a move that may cushion the commercial real-estate industry from rising defaults and falling prices payday loans.

The Term Asset-Backed Securities Loan Facility, with a capacity of as much as $1 trillion, will expire June 30 for newly issued commercial mortgage-backed securities, instead of Dec. 31, the Fed and U.S. Treasury said today in a statement in Washington. For other asset-backed securities and CMBS sold before Jan. 1, the plan was extended three months to March 31.

Tighter Than Average

With regard to commercial real estate loans, “nearly all banks indicated that current standards were tighter than their longer-term average levels,” the Fed report said. “Around 40 percent expected standards to return to longer-term average levels by the second half of 2010 or in 2011 for both investment-grade and non-investment-grade lending.”

The Fed and the Treasury have loaned or invested billions of dollars in banks to support credit growth. The Fed has expanded total assets on its balance sheet by $1.1 trillion to $2 trillion, channeling loans to banks, corporations, and programs aimed at reviving financing to consumers and real estate.

The Federal Open Market Committee said Aug. 12 that “economic activity is leveling out,” the strongest indication yet that officials may see an end to the worst recession since the 1930s. Household spending remains constrained due to job losses and “tight credit,” officials said.

Economy to Expand

Forecasters surveyed by Bloomberg News expect the economy to expand at a 2.2 percent annual pace in the third quarter, according to the median estimate of 55 economists.

Economic reports suggest the recovery could be slower. Sales at U.S. retailers fell 0.1 percent in July, the first drop in three months, the Commerce Department said Aug. 13. The Reuters/University of Michigan preliminary index of consumer sentiment decreased to 63.2 in August, the lowest since March, from 66 in July. The measure reached a three-decade low of 55.3 in November.

A 3.3 percent decline in the Standard & Poor’s Financials Index helped lead the S&P 500 to a 2.2 percent decline at 1:45 p.m. in New York trading today.

The Fed’s April Senior Loan Officer Survey showed that about half of respondents reported tightened lending on prime mortgages, and about 60 percent set stricter standards for credit card loans.

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Confidence among U.S. consumers unexpectedly fell in August as concern over jobs and wages grew.

Today’s figures, including an unchanged reading in the cost of living, underscore the damage that the biggest drop in gross domestic product in any recession since the 1930s has had on households and retailers. With little sign that $1 trillion of injections into the banking system is feeding through to inflation, Federal Reserve policy makers are forecast to sustain their efforts until a recovery is secured. Stocks tumbled.

“If consumers are lacking confidence, then they will not be able to help us spend our way out of this long, dark recession,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Households are still concerned about the jobs outlook, and certainly, Fed policy is also gearing off of the labor markets as no Fed has lifted interest rates while the unemployment rate is rising.”

The Reuters/University of Michigan preliminary index of consumer sentiment decreased to 63.2 this month, the lowest since March, from 66 in July. The measure reached a three- decade low of 55.3 in November. The Labor Department said its consumer price index was unchanged from June as forecast, and dropped by 2.1 percent — the most in six decades — from July 2008.

Economists had forecast the confidence index would rise to 69, according to the median projection in a Bloomberg News survey. Estimates ranged from 64 to 75.

Stocks, Treasuries

The Standard & Poor’s 500 Index declined 0.9 percent to close at 1,004.09. The gauge yesterday reached the highest level since October. Treasuries rose after the consumer price report showed no sign of inflation, and benchmark 10-year note yields fell to 3.57 percent from 3.60 percent late yesterday.

The worst employment slump in seven decades has caused salaries to stagnate, rocking even Americans who still have jobs. The need to rebuild savings following the record drop in wealth from the plunge in stocks and home values will keep limiting spending in coming months, analysts said paydayloans.

Retailers including Nordstrom Inc., Abercrombie & Fitch Co. and American Eagle Outfitters Inc. have used discounts to lure consumers on tight budgets.

Wal-Mart Stores Inc., the world’s largest retailer, said yesterday that sales at U.S. stores open at least a year fell 1.2 percent. Eduardo Castro-Wright, the company’s U.S. stores chief, attributed the drop to stronger than expected deflation in grocery prices.

Tame Inflation

“I don’t really see inflation as being much of a threat over the next several months because there’s just too much slack in the economy,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida.

The inflation report from Labor showed that excluding food and energy costs, the so-called core index rose 0.1 percent, also as anticipated.

Separate figures showed that industrial production rose for the first time in nine months in July as a federal “cash- for-clunkers” program spurred demand for cars and automakers completed mid-year overhauls of their factories. The Fed said output at manufacturers, mines and utilities increased 0.5 percent increase after a 0.4 percent drop in June.

“It’s a start of the recovery in manufacturing,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. “A lasting recovery in manufacturing depends on whether the pickup in auto demand can be sustained.”

Capacity utilization, the proportion of factory volume in use, rose from its lowest level since record-keeping began in 1967, increasing to 68.5 percent from a revised 68.1 percent the prior month.

Economists track plant operating rates to gauge factories’ ability to produce goods with existing resources. Lower rates reduce the risk of bottlenecks that can force prices higher.

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