Consumer Confidence Surges In May

Surprising jump in views of economy, job market

May 26, 2009
Something happened between April and May to give U.S. consumers a lot more confidence in their economic well-being. The Conference Board reports its Consumer Confidence Index jumped from 40.8 in April to 54.9 in May.

The 14-point swing was the largest one-month change since April 2003.

The Present Situation Index increased to 28.9 from 25.5 last month. The Expectations Index rose to 72.3 from 51.0 in April.

The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS, a research firm.

"After two months of significant improvements, the Consumer Confidence Index is now at its highest level in eight months," said Lynn Franco, Director of The Conference Board Consumer Research Center. "Continued gains in the Present Situation Index indicate that current conditions have moderately improved, and growth in the second quarter is likely to be less negative than in the first. Looking ahead, consumers are considerably less pessimistic than they were earlier this year, and expectations are that business conditions, the labor market and incomes will improve in the coming months. While confidence is still weak by historical standards, as far as consumers are concerned, the worst is now behind us."

Consumers' overall assessment of current-day conditions improved again. Those claiming business conditions are "good" increased to 8.7 percent from 7.9 percent. However, those claiming conditions are "bad" increased to 45.3 percent from 44.9 percent.

Consumers' appraisal of the job market was also more favorable. Those claiming jobs are "hard to get" decreased to 44.7 percent from 46.6 percent in April. Those saying jobs are "plentiful" edged up to 5.7 percent from 4.9 percent.

Consumers' short-term outlook improved significantly in May. Those expecting business conditions will improve over the next six months increased to 23.1 percent from 15.7 percent, while those anticipating conditions will worsen declined to 17.8 percent from 24.4 percent in April.

The employment outlook was also less pessimistic. The percentage of consumers expecting more jobs in the months ahead increased to 20.0 percent from 14.2 percent, while those anticipating fewer jobs decreased to 25.2 percent from 32.5 percent. The proportion of consumers anticipating an increase in their incomes edged up to 10.2 percent from 8.3 percent.

Wall Street seized on the report as much-needed good news. The more favorable consumer sentiments outweighed concerns about North Korea’s nuclear test and a big drop in home prices to give the Dow Jones Average a triple-digit gain at mid-day Tuesday.

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