NEW YORK (AP) – Consumer confidence extended its rebound in May, soaring to the highest level since September as more shoppers are feeling the worst of the recession is behind them.
The Conference Board said today that its Consumer Confidence Index, which had dramatically increased in April, zoomed past economists’ expectations to 54.9 from a revised 40.8 in April. Economists surveyed by Thomson Reuters were expecting 42.3.
The reading marks the highest in eight months when the level was 61.4. The levels are also closer to the year-ago reading of 58.1.
The Present Situation Index, which measures how shoppers feel now about the economy, rose to 28.9 from 25.5 last month. But the Expectations Index, which measures shoppers’ outlook over the next six months, climbed to 72.3 from 51.0 in April.
“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,” Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement.
“While confidence is still weak by historic standards, as far as consumers are concerned, the worst is now behind us.”
The upbeat reading was good news for merchants, who are counting on consumers to be in the mood to spend, after confidence plummeted to historic lows in recent months. A two-month stock rally has helped make shoppers feel a little better about their retirement funds.
And better-than-expected earnings results from such retailers as Sears Holdings Corp., Gap Inc. and Aeropostale Inc. in recent days have offered the latest evidence that spending has begun to stabilize, though overall business is still weak.
But economists are worried that the stock market rally may not be sustainable because the economy still faces a number of challenges, including a still-weak housing market and the grim job picture.
The latest report on home prices, released today, wasn’t comforting. Home prices fell at the fastest annual rate on record in the first quarter, though the pace of month-to-month declines continues to slow, according to a closely watched housing index.
The Standard & Poor’s/Case-Shiller National Home Price index reported home prices tumbled by 19.1 percent in the first quarter, the most in its 21-year history.
Home prices have fallen 32.2 percent since peaking in the second quarter of 2006 and are at levels not seen since the end of 2002.
Meanwhile, Americans continue to focus on buying necessities as they worry about their jobs. The unemployment rate is expected to climb to 9.2 percent in May from 8.9 percent in April, and employers are expected to shed a net total of 523,000 jobs, according to economists surveyed by Thomson Reuters. The Labor Department is expected to release unemployment figures on June 5.