WASHINGTON – U.S. consumers were slightly more confident in the economy in May than in April, partly because of strengthening optimism about future hiring and income gains.
The Conference Board said Tuesday that its confidence index rose to 83 from a revised 81.7 in April. That’s the second-highest reading since January 2008, just after the Great Recession began. Only March was higher at 83.9.
The increase is “enough to suggest decent, but not spectacular, gains in consumers’ spending,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a note to clients.
Confidence has climbed steadily since it bottomed out at 25.3 in February 2009. It sits significantly above last year’s average of 72.3. But it still isn’t back to healthy levels. The figure regularly topped 90 before the recession.
A rising stock market helped boost confidence in May, economists said. Gains, however, were likely limited by higher gas prices pushing in the opposite direction.
Overall, Americans are much more bullish about the job market, the Conference Board’s survey showed. That’s a good sign that hiring may have been healthy this month. The government will report May’s jobs figures on June 6.
The number of Americans who consider jobs easier to find rose to a six-year high. And 15.4 per cent of consumers expect hiring to pick up in the next six months, up from 14.7 per cent in April.
The survey also showed that nearly one-fifth of Americans expect their incomes to grow over the next six months, the highest level since December 2007. More Americans said they planned to buy a car in the next six months, though the percentage saying they planned to buy a house fell to the lowest level in 15 months.
Consumer sentiment is a closely watched figure, as consumer spending accounts for 70 per cent of the nation’s economic activity.
A recent burst of hiring likely has boosted confidence.
Employers added 288,000 jobs in April, the most in 2 1/2 years. The national unemployment rate fell to 6.3 per cent in April from 6.7 per cent.
The job gains should provide much-needed support for the economy. More Americans earning paychecks means more spending to help boost growth.
The economy expanded at a scant 0.1 per cent annual rate in the first quarter. Data released since then indicate that the economy probably contracted by as much as 0.8 per cent from January through March. That is a sharp reversal from an annual pace of 3.2 per cent in the second half of last year.
Economists have blamed cold weather and snowstorms for most of the slowdown. The harsh winter weather kept shoppers away from the malls and car dealer lots, while also shutting down some factories and disrupting shipping.
Growth is expected to bounce back in the current April-June quarter, perhaps to an annual pace as high as 3.5 per cent. Home construction, car sales and retail sales have all recovered as the weather has improved.