The U.S. housing sector remains in the dumps, but consumer confidence is starting to show more than pulse.
Consumer confidence surged for the second straight month in May, rising 14.1 points to 54.9, The Conference Board announced Tuesday. The index rose to 40.8 in April from 26.9 in March. A Bloomberg News survey of economists had expected the index to rise to 43.0 in May.
The index is now at its highest level in eight months, or since September 2008, when it was at 61.4.
Better mood toward job market
What accounted for the May surge in consumer confidence? Ironically, despite the high 8.9 percent U.S. unemployment rate, Americans are viewing the job market less pessimistically. Those expecting more jobs in the months ahead increased to 20 percent in May from 14.2 percent in April, while those expecting fewer jobs decreased to 25.2 percent from 32.5 percent. Also, those anticipating an increase in their income edged up to 10.2 percent from 8.3 percent.
Further, consumers' short-term outlook improved significantly in May. Those expecting business conditions to improve in the next six months increased to 23.1 percent in May from 15.7 percent in April, while those expecting conditions to worsen declined to 17.8 percent from 24.4 percent.
Still, although the most recent consumer confidence data is encouraging, investors should not expect the U.S. economy that emerges from its worst recession in decades to approximate the one that entered it, says David Rosenberg, chief economist for Gluskin, Sheff & Associates Inc. in Toronto.
"This is going to be a new era of frugality," Rosenberg told Bloomberg News Tuesday. "This isn't some flashy two- or three-quarter deal. This is a secular change in household attitudes."
The Consumer Confidence Index is based on a representative sample of 5,000 households.
Economic Analysis: Another encouraging survey data point for the U.S. economy, and investors, at least as of mid-day Tuesday, responded accordingly, with the Dow rising substantially. Still, given the enormous changes taking place macro-economically, investors will likely have to see months of comprehensive good news (business hirings, increased earnings, deals, project expansions) before they commit to U.S. stocks in a sustained way. That said, three months ago, in February, consumer confidence was at an all-time low around 25, so the attitude trend is positive; if demand increases and job losses slow in the months ahead, look for economists to flesh-out that U.S. economic recovery timetable.
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