Consumer Confidence Rises
The New York-based Conference Board reported Tuesday that its Consumer Confidence Index rose to a greater-than-expected 115.5, up from a revised 109.9 in April.
The board's survey of consumers was completed before Saturday's Congressional approval of a $1.35 trillion, 10-year tax cut that President Bush intends to sign during the first week of June.
Analysts were expecting a reading of 112.0 in May.
The Conference Board index, based on a monthly survey of some 5,000 U.S. households, is considered a key indicator because consumer spending accounts for about two-thirds of the nation's economic activity. The index compares results to its base year, 1985, when it stood at 100.
Eroding consumer confidence, hurt in part by higher energy costs and layoffs across the country, has contributed to two quarters of anemic growth for the U.S. economy. The Federal Reserve Board has cut interest rates five times this year in an effort to keep the economy from sliding into a recession.
Consumers now seem to believe the economy is poised for a rebound.
"The rebound in consumer confidence was driven by optimism about future economic conditions," said Lynn Franco, director of the Conference Board's Consumer Research Center.
"Latest findings report rising confidence about job prospects over the next six months, but reveal growing concern about the current job market," Franco said. Nonetheless, the index showed no signs that consumers will curtail their spending, which points to continued economic growth, she added.
Another report released Tuesday also indicated a strengthening economy.
The Commerce Department reported Tuesday that consumer spending rose by 0.4% in April, following a 0.2% increase the month before. May's rise marked the biggest increase since January and came after April's confidence numbers dipped from a reading of 116.9 in March.
The markets were mixed following the release of the reports, with the Dow Jones industrial average up 14 points to 11,019 and the Nasdaq composite index off 45 points to 2,205.
Consumers were more optimistic about the outlook over the next six months, the Conference Board said. The percentage of consumers expecting a pickup in business conditions rose from 14.1% to 16.8%.
They were also more upbeat about future employment prospects. Of the consumers surveyed, 13.8% expect more jobs to become available, up from 12.3% last month. Those expecting fewer jobs declined from 22.9% to 19.9%.