NEW YORK — Consumer confidence unexpectedly surged in May, but stocks still fell on Tuesday due to a lackluster reading from a closely watched barometer of the manufacturing sector in the Midwest.
The Conference Board said Tuesday that its Consumer Confidence Index bounced back in May to 102.2 from April’s 97.5, ending a four-month slide. Analysts and economists had expected a decline, with the index falling to between 95 and 96.
The reversal of the index was led by a gain in the Expectations component, which jumped 5.8 points to 92.5 from 86.7 in April. The Present Situation component also gained 2.9 points to 116.7 from 113.8 last month.
“Consumer confidence improved in May, gaining back nearly all of the ground it lost in April,” said Lynn Franco, director of the Conference Board’s Consumer Research Center, in a statement.
Franco said the Present Situation Index, “despite fluctuations in recent months, is more than 26 points higher than a year ago,” and that the Expectations Index, “while slightly below year-ago levels, continues to signal economic growth in the months ahead.”
Jim Rice, retail analyst at Susquehana Financial Group, said the Consumer Confidence Index rose because “gas prices stabilized and went down a bit. Everyone had anticipated a steep climb upward, but the sticker shock at the pump stopped, which helps the consumer.”
UBS economist Maury Harris saw strength in May’s reading. “The distribution is encouraging because consumer spending is better correlated with expectations than the current conditions component,” he wrote in a research note Tuesday.
The economist also noted that households “fractionally” upgraded their assessments of the job market, with those rating jobs as plentiful rising more than those rating jobs as hard to get.
Anne Maxfield, co-founder of Project Solvers, a staffing firm targeting the fashion, design and cosmetics industries, said the labor market is “OK in our sector. It’s not tremendous, but not horrible.”
Maxfield observed, “People have been staying put at their place of employment unless they get an offer that they just can’t refuse. For the most part, its still tough to get a higher-level job. There’s not a lot in our sector that pays $100,000-plus at the senior levels.”
This story first appeared in the June 1, 2005 issue of WWD. Subscribe Today.
Despite the strength in May’s reading, stocks fell Tuesday because of a report from the Purchasing Management Association of Chicago. Its monthly index of business activity fell to 54.1 from 65.6 in April. Generally, a Chicago PMI reading above 50 indicates expansion in the manufacturing sector.
The expectation was for a decline to around 61, but instead the Chicago PMI fell to its lowest level in close to two years.
The Dow Jones Industrial Average ended the day down 75.07 points to close at 10,467.48.