U.S. consumer sentiment improved in early August to its highest level in three months as sales at retailers and low mortgage rates spurred Americans to buy more.

A separate gauge of future U.S. economic activity also improved in July.

But concerns about rising food prices caused a jump in both short- and long-term inflation expectations, the Thomson Reuters/University of Michigan consumer sentiment survey showed.

The preliminary reading on the index on consumer sentiment rose to its highest level since May at 73.6 from 72.3 last month, topping economists' forecasts for a slight uptick to 72.4.

"Although the growth rate in personal consumption expenditures can be expected to rebound from the second quarter lull, growth can be expected to remain just under two percent to the end of the first quarter of 2013," survey director Richard Curtain said in a statement.

Buying plans were bolstered by cheap prices and the measure of buying conditions for household durable rose to 140 from 130.

The survey's barometer of current economic conditions climbed to 87.6 from 82.7, but the survey's gauge of consumer expectations slipped to 64.5 from 65.6. Expectations were at their lowest level since December.

The one-year inflation expectation rose to the highest level since March at 3.6 percent from 3.0 percent, while the survey's five-to-10-year inflation outlook was at 3.0 percent from 2.7 percent.

U.S. stocks rose slightly higher Friday, led by etches, following the better-than-expected report.

Leading Economic Indicators Rise

A separate gauge of future U.S. economic activity improved in July on a drop in new claims for jobless benefits and an increase in housing permits, although the reading still pointed to sluggish growth ahead.

The Conference Board said on Friday its Leading Economic Index climbed 0.4 percent to 95.8, reversing a 0.4 percent decline in June.

Analysts surveyed by Reuters had forecast the index would rise 0.2 percent in July.

Fewer jobless claims last month was the biggest driver in the increase of the index, the Conference Board said. Also, building permits jumped during the month, which could point to more construction down the road.

Strong retail sales during July has boosted the view that economic growth will pick up in the second half of the year but remain lackluster. Growth and hiring were disappointing in the spring, boosting expectations the Federal Reserve could unleash more economic stimulus.

"The indicators point to slow growth through the end of 2012," said Ken Goldstein, an economist at the Conference Board.

"However, back-to-school sales are better than expected, suggesting that the consumer is starting to come back," he said.

Source: CNBC.com