Americans expressed more optimism about the economy this month, according to the Reuters/University of Michigan Index of Consumer Sentiment, which recorded a reading of 61.2 in July. The data, released today, represents a slight uptick from June's 56.4 reading.  The reason behind the optimism? Cheaper gas. "A late-month decline in gasoline prices buoyed sentiment, temporarily overshadowing concerns about falling home prices and a weak job market," said Brian Bethune, chief U.S. economist for Global Insight, a research firm in Lexington, Mass.

The reduction wasn't much--just more than a nickel. The national average price for one gallon of unleaded regular-grade gasoline was $4.006 today, according to the American Automobile Association's Daily Fuel Gauge Report, down from $4.067 one month ago.

But it was enough to make a difference to Americans, who are watching their wallets nervously. "More than half of all consumers reported that their financial situation worsened due to higher food and fuel prices and half anticipated that their overall living standards would decline in the year ahead," according to the University of Michigan report. It also said that 90% of consumers think the country is in a recession.

The tax rebate checks have helped, but Bethune believes the benefit of those checks will be temporary. "High oil and food prices spell trouble for the economy later this year, once the fiscal stimulus fades," he said. “With employment, real wages, and household wealth declining, the stage is set for a pullback in real consumer spending in late 2008 and early 2009."

Alison Rice is senior editor, online, at BUILDER magazine.

Learn more about markets featured in this article: Ann Arbor, MI.