NEW YORK (Reuters) - U.S. consumer sentiment rose in late September to the highest since January 2008 as expectations of an economic rebound gathered momentum, a survey showed on Friday 25 September.

The data added to indications the economy is pulling out of a lengthy recession more powerfully than many analysts had expected a few months ago, although doubts persist about how much staying power the rebound may have.

The Reuters/University of Michigan Surveys of Consumers said its final index of sentiment for September rose to 73.5 from 65.7 in August. This was above economists' median expectation for a reading of 70.3, according to a Reuters poll.

The index of consumer expectations rose to 73.5, the highest in two years, from 65.0 in August.

U.S. stock indexes initially bounced on the news but then slipped, while Treasury debt prices were off slightly and the dollar fell against the yen and euro.

"The same pace of gains in confidence continued in late September as the economic news reaching consumers grew even more positive," the Reuters/University of Michigan Surveys of Consumers said in a statement. "Consumers reported that the economy had already begun to improve and anticipated further gains in the year ahead."

The index of current conditions rose to 73.4 in late September from 66.6 in August.

"It looks like people feel better about both current conditions and the future. If we can only get business sentiment to improve a bit more, we'd probably go from a yellow light to a green light," said Gary Thayer, macro strategist with Wells Fargo Advisors in St. Louis. "If business sentiment picks up, the job situation would improve and consumer sentiment will improve further."

The survey's 12-month economic outlook jumped to 88 in late September from 69 in late August.

"The data provide considerable evidence that the economy has already begun to recover," the Reuters/UMich statement said. "Nonetheless, the pace of gains in consumer spending are still expected to be slower than usual due to expected lags in job and income gains as well as the renewed desires of consumers to save and the more limited availability of credit."

(Additional reporting by Ellen Freilich)

(Reporting by John Parry; Editing by James Dalgleish and Dan Grebler)