Consumer confidence rose in May to the highest level since October 2007 as Americans became more upbeat about the prospects for employment.
The Thomson Reuters/University of Michigan final index of sentiment climbed to 79.3, the ninth straight increase, from 76.4 the prior month. The gauge was projected to hold at the preliminary reading of 77.8, according to the median forecast of economists surveyed by Bloomberg News.
A record number of households said they’d heard better news on the jobs outlook, which combined with cheaper gasoline and an improving housing market may help sustain consumer spending and shield the economy from Europe’s debt crisis. The figures also showed 63 percent of Americans, the most in more than a year, had a favorable view of buying conditions for big-ticket items.
“This is telling us the consumer is feeling OK,” said Robert Brusca, president of Fact & Opinion Economics in New York, who projected a final reading of 78.5 in May. “There seems to be enough real improvement in the job market for confidence to be increasing. When confidence readings increase, you can be pretty sure consumer spending numbers will go up.”
Estimates for the confidence measure ranged from 76 to 79, according to the Bloomberg survey of 60 economists. The index averaged 64.2 during the last recession and 89 in the five years before the 18-month economic slump that ended in June 2009.
Stocks fell as concern about Spain’s finances tempered optimism with the Michigan figures. The Standard & Poor’s 500 Index dropped 0.2 percent to 1,317.82 at the close in New York. The yield on the benchmark 10-year Treasury note decreased to 1.74 percent from 1.78 percent Thursday.
Michigan’s reading for May contrasts with the Bloomberg Consumer Comfort Index, which has lost ground after reaching a four-year high a month ago.
Friday’s figures also indicated Europe’s financial crisis was not high on the list of Americans’ concerns. Reports showed it’s also having limited impact on sentiment in Europe.
The Michigan survey’s index of current conditions, which reflects Americans’ perceptions of their financial situation and whether they consider it a good time to buy big-ticket items like cars, rose to 87.2, the strongest since January 2008, from 82.9 the prior month.
The index of consumer expectations six months from now, which more closely projects the direction of consumer spending, increased to 74.3, the highest since July 2007, from 72.3 in April.
The unemployment rate slid to 8.1 percent in April, the lowest level since January 2009, Labor Department figures showed this month. Employers added 115,000 workers to payrolls, the fewest since October, according to the data.
“The most likely prospect is that job growth resumes at a modest pace and that confidence remains largely unchanged until after the November election and decisions about tax policy are made,” Richard Curtin, head of the University of Michigan’s consumer survey, said in a statement.
Economists project payroll growth expanded by about 150,000 this month, according to the median estimate in a Bloomberg survey. The Labor Department will issue its May employment report Friday.
“This is a good report,” Yinbin Lei, an economist at IHS Global Insight, said in a note to clients. “Consumer mood is slowly coming out of the ditch.”
Still, consumers face plenty of challenges, Lei noted, such as weak wage growth, rising student loan debt, and a poor housing market.
By Alex Kowalski
BLOOMBERG NEWS
The Associated Press contributed to this report.
The Associated Press contributed to this report.
