A brighter outlook among consumers is due, in part, to a steady increase in home prices after a painful six-year slump. Higher home prices can help create a "wealth effect," making homeowners feel richer and spurring more spending.
Banks are also more likely to lend freely when home prices rise because homes are more likely to hold their value.
Americans have also been shrinking debts and saving slightly more. Household debt as a percentage of after-tax income dropped from about 125 percent before the recession to 103 percent in the April-June quarter, according to the Federal Reserve's latest data. That ratio was roughly 90 percent in the 1990s.
But thanks to record-low interest rates, the cost of repaying those debts has dropped sharply. That, in turn, will free up more money for consumers to spend on cars, appliances and other goods.
Americans paid 10.7 percent of their after-tax income in interest on mortgages, credit cards and other consumer debt in this year's April-June quarter, according to the Fed. That was down from 14 percent at the end of 2007. And it's the lowest proportion since 1993.
"That's 3 percentage points of disposable income that I am no longer using to pay for stuff that I bought earlier but I can instead use to buy stuff now," noted Alan Levenson, chief economist at T. Rowe Price.
Economists note that economic recoveries after financial crises tend to be painfully slow. In part, that's because time is needed for consumers to reduce debts and for banks to recover and lend again.
Paul Ashworth, an economist at Capital Economics, noted that banks have boosted lending for the past 18 months — another sign that the passage of time is helping the economy rebound.
Obama "is going to have an easier time of it ... because we're further along the road to recovery after the financial crisis," Ashworth said.
- 23 of the best Shakespearean insults to...
- More than 2,500 confirmed dead in Nepal...
- The Latest on Nepal Quake: Stronger quake may...
- Clinton Foundation acknowledges mistakes in...
- Utah's Tibetan community prays, mourns for...
- How to help Nepal earthquake victims
- Former Romney finance chairman courting a...
- Mitt Romney to Jacksonville University...
- Former Romney finance chairman courting... 58
- Gay marriage a difficult issue for GOP... 31
- Obama sounds alarm on climate damage in... 30
- House Benghazi panel calls Clinton to... 29
- Yellowstone supervolcano is super big,... 24
- American, Italian hostages killed in US... 22
- Clinton Foundation admits missteps in... 15
- Hatch, Lee split on new attorney general 13