Consumer confidence unexpectedly rebounded in May after declining in April, as worries about the economy and jobs eased, a private research group said Tuesday. But another closely watched report that tracks Midwestern manufacturing activity fell in May.
The Conference Board said that its Consumer Confidence Index rose to 102.2 from a revised 97.5 in April. The reading was much better than the 96 that analysts had expected, which would have been a decline from the original April reading of 97.7.
The consumer confidence index is now at the highest level since it reached 103 in March.
“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.
Economists closely track consumer confidence because consumer spending accounts for two-thirds of all U.S. economic activity.
Still, stocks fell Tuesday as the disappointing reading of economic activity in the Midwest appeared to outweigh rebounding consumer confidence.
The Purchasing Management Association of Chicago announced that its index of business activity in that area dropped to 54.1 in May from 65.6 in April and 69.2 in March. A reading above 50 indicates expansion in manufacturing, while a figure below 50 means contraction.
Mark Vitner, senior economist at Wachovia Corp. in Charlotte, N.C., said that the upbeat report on consumer confidence didn’t “mark any sea change.”
He added, “Consumers are still taking a fairly cautious view on the economy’s near-term economic prospects, but they are feeling a little better now that gasoline prices can come down.”
Vitner noted that higher gasoline prices give consumers “a general sense of unease” because they tend to be associated with “tough economic times.”
The big worry still is a volatile job market, which is improving but still lagging, he said.
Employers stepped up hiring in April, adding a better-than-expected 274,000 jobs, as the nation’s jobless rate held steady at 5.2 percent. The Labor Department is expected to release job figures for May this Friday. Analysts are expecting an increase of 180,000 jobs and an unemployment rate of 5.2 percent.
One component of the consumer confidence report, the Expectations Index that measures consumers’ outlook over the next six months, improved to 92.5 from 86.7. The Present Situation Index, which is more than 26 points higher than a year ago, increased to 116.7 from 113.8.
The Conference Board’s gauges are derived from responses received through May 23 to a survey mailed to 5,000 households in a consumer research panel. The figures released Tuesday include responses from at least 2,500 households.
Consumers’ assessment of current conditions was more upbeat in May than in April. Those saying that business conditions are “bad” edged down to 16.8 percent from 17.6 percent. Those claiming conditions are “good” was virtually unchanged at 26.5 percent.
The employment picture was mixed. Consumers saying jobs are “hard to get” increased to 24.2 percent from 22.9 percent, but those claiming jobs are “plentiful” rose to 22.6 percent from 20.4 percent.
Consumers’ expectations for the next six months, which had been losing ground since January, reversed course in May. Those anticipating business conditions to improve increased to 18.6 percent from 17.7 percent, while consumers anticipating business conditions to worsen slid to 9.5 percent from 9.9 percent.
The outlook for the labor market was also more positive in May. Those expecting more jobs to be available in the coming months rose to 14.9 percent from 14.0 percent, while those anticipating fewer jobs fell to 15.9 percent from 18.4 percent. The proportion of consumers expecting incomes to improve in the months ahead rose to 17.2 percent from 16.8 percent.
