June 12 (Bloomberg) -- Confidence among U.S. consumers rose this month for a fourth straight time, reflecting signs that the worst recession in at least five decades may end this year.

The Reuters/University of Michigan preliminary index of consumer sentiment increased to 69, less than forecast while the highest level in nine months, from 68.7 in May.

Job losses are slowing, recent reports show housing and manufacturing -- the two worst parts of the economy -- are stabilizing, and the Obama administration’s fiscal stimulus may help shore up consumer demand. Still, a record loss of wealth is causing Americans to boost savings, and unemployment is forecast to keep rising, so a recovery will be slow to take hold.

“Confidence is slowly but surely coming back,” James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut, said before the report. “In the next few months we should see more follow-through in the labor market, which in turn should give confidence a further boost, which in turn should lead to a sustained recovery in consumer spending.”

The confidence index was forecast to rise to 69.5, according to the median of 62 economists surveyed by Bloomberg News. Estimates ranged from 65 to 73.2.

A gauge of current conditions, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items such as cars, rose to 74.5, the highest since September, from 67.7.

6-Month Expectations

The Reuters/University of Michigan index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, fell to 65.4 in June from 69.4 the prior month.

Earlier today, the Labor Department said prices of goods imported into the U.S. rose in May for the third straight month, reflecting the increasing cost of oil that threatens to undermine the economy just as it struggles to pull out of the recession. The 1.3 percent gain in the import-price index, the largest since July last year, was in line with forecasts and followed a revised 1.1 percent increase the prior month.

Prices excluding fuels climbed 0.2 percent from a month earlier and were down 5.8 percent on an annual basis -- the biggest drop since records began in 1985.

Consumers in today’s sentiment report said they expect an inflation rate of 3.1 percent over the next 12 months, after 2.8 percent in the May survey.

Over the next five years, the measure tracked by Federal Reserve policy makers, Americans also expected a 3.1 percent rate of inflation, compared with their 2.9 percent forecast last month.

Stock Market

The Standard & Poor’s 500 Stock Index has soared about 38 percent since March 9 -- when it hit 676.53, the lowest level in more than 12 years -- amid evidence the worst of the downturn has passed. The index was at 936.34 as of 10:04 a.m. today in New York.

New-home sales climbed 0.3 percent in April, Commerce said last month, and purchases of existing homes increased 2.9 percent, according to the National Association of Realtors.

A report yesterday from Labor showed fewer Americans filed claims for unemployment benefits last week, indicating the deepest job cuts may be subsiding even as companies hold off on hiring. Initial jobless claims fell by 24,000 to 601,000 in the week ended June 6, the lowest level since January. The number of people collecting benefits, meanwhile, rose to 6.82 million in the prior week, reaching a record for a 19th straight time.

Store Sales

Wal-Mart Stores Inc., the biggest retailer, projected last month that U.S. comparable-store sales may rise as much as 3 percent in the 13 weeks through July 31 as Americans seek discounted merchandise.

Federal Reserve Chairman Ben S. Bernanke told Congress last week that the pace of decline in the economy was slowing and consumer spending had stabilized.

Spending “has been roughly flat since the turn of the year,” he said. While the fiscal stimulus will boost spending power, weak labor conditions, tight credit and falling wealth may limit sales, he said.

Even so, recent reports present a mixed picture.

The pending demise of thousands of Chrysler LLC and General Motors Corp. dealers attracted customers back to showrooms, helping retail sales rise for the first time in three months in May, the Commerce Department said yesterday in Washington. The increase was also fueled by higher gasoline prices.

“It’s just a slight uptick,” Ken Czubay, Ford vice president of sales and marketing, said on a conference call June 2. “This is still a very fragile industry.”

The average price of a gallon of regular gasoline has risen by about $1 since the end of last year, according to AAA.

Spending Forecasts

Personal spending, which accounts for 70 percent of the economy, will fall at a 0.6 percent annual pace in the current quarter and rise at an average 1.1 percent pace in the last six months of the year, according to the median forecast of economists surveyed this month. The projections were down from last month’s estimates.

For all of 2009, purchases will drop 0.7 percent, the worst performance since 1974, the survey showed. The economists surveyed also forecast the jobless rate will climb to 10 percent by the end of 2009, the highest rate since 1983.

The unemployment rate rose to 9.4 percent in May, the highest level since 1983, partly because more people joined the labor force to look for work, according to Labor data released June 5. Payrolls fell by 345,000, the smallest drop in eight months.

To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net

Last Updated: June 12, 2009 10:11 EDT