Consumer confidence rose to a five-year high this month, gaining much more swiftly than economists projected.
The Conference Board’s Consumer Confidence Index increased to 76.2 for May, up from 69 in April and 61.9 in March. Economists expected the index to post a much smaller rise to 70.8. The measure of consumer sentiment is at its highest level since February 2008, when the index stood at 76.4.
The Present Situation Index, which is half of the overall index, increased to 66.7 from 61 while the Expectations Index rose to 82.4 from 74.3.
“Consumers’ assessment of current business and labor-market conditions was more positive, and they were considerably more upbeat about future economic and job prospects,” said Lynn Franco, director of economic indicators at the research group. “Back-to-back monthly gains suggest that consumer confidence is on the mend and may be regaining the traction it lost due to the fiscal cliff, payroll-tax hike and sequester.”
Of the people who took part in The Conference Board’s survey, 16.8 percent said they expected the number of jobs to increase in the months ahead, up from 14.3 percent.
“Consumer mood has shown some strength in the past two months as the sequester [budget] issue has passed from page one temporarily and pump prices started to fall,” said Chris G. Christopher Jr., director of consumer markets at IHS Global Insight. “The recent rise in home values and the stock market is helping many Americans feel more optimistic as well. The recent payroll numbers are another big plus on the consumer confidence front.”
Christopher, however, noted that “consumer confidence is very fickle and prone to very large mood swings.” He projected real consumer spending growth would rise 2.1 percent this year, which he described as “relatively respectable, but nothing to write home about.”
The cheery consumer report helped buoy Wall Street, which came back from the three-day Memorial Day weekend in a bullish mood.
The S&P 500 Retailing Industry Group gained 0.6 percent, or 4.70 points, to 793.46, as the Dow Jones Industrial Average increased 0.7 percent, or 106.29 points, to 15,409.39.