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Confidence Rises in May With Eye on End of the Year

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BLOOMBERG NEWS

U.S. consumer confidence rose in May as Americans refused to let an eroding job market cloud their expectations the economy will pick up.

The Conference Board said its index rose to 115.5 in May from 109.9, driven by an improved outlook for the economy six months from now.

While participants of the private research group’s survey were concerned that jobs were hard to find, they didn’t pull back on their plans to buy appliances, automobiles and homes.

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A separate report from the Commerce Department found that consumer spending rose in April, even with the slowest gain in incomes in five months. Consumer spending accounts for two-thirds of the economy.

“The consumer has been pretty resilient to any of the ill winds of layoff announcements and higher unemployment,” said Richard Yamarone, senior economist with Argus Research Corp. in New York.

“There still are some positive fundamentals in this economy: The stock market is up, interest rates are low and general price inflation is well behaved.”

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The Conference Board’s index reflected growing optimism about how the economy will be performing toward the end of 2001. The expectations index rose to 86.8 in May, the highest since December, from 79.1 in April.

The view of current conditions also improved, evidenced by a rise in the present situation index to 158.6 in May from 156 in April. The more favorable view of the economy evolved amid a sense that employment had become less secure.

The share of consumers seeing jobs as plentiful fell to 39.5% in May, the lowest since November 1997. The share seeing jobs as not so plentiful rose. The share viewing jobs as hard to get rose to 14.7% in May, the highest since October 1998.

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Still, the survey detected a feeling that employment may improve. The share expecting more jobs to be available six months from now rose to 13.8%, the highest since December, from 12.3% in April. Fewer expected a shrinking job market, and two-thirds saw no change in employment.

That, along with five interest-rate cuts this year by Fed policymakers, may explain the improvement in spending plans. The share planning to buy an automobile rose to 9.5% from 7.7% in April. The share planning to buy a major appliance rose to 30.2% from 29.8% in April.

In its report, the Commerce Department said consumer spending rose 0.4% in April after increasing 0.2% a month earlier. Personal incomes grew 0.3%, the slowest pace since November.

The April spending increase is the largest since a 1.1% rise in January and was paced by spending on nondurable goods such as clothing. Those outlays rose 0.7% in April after falling 0.3% the previous month.

Spending on services, which make up more than half of the report, rose 0.5% after rising 0.7% a month earlier. Some of the increase may have reflected higher utility costs in California.

The personal savings rate changed to minus 0.7% in April from a minus 0.6% in March. The savings rate weighs current income against spending.

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(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Consumer Confidence

From a monthly survey of 5,000 U.S. households.

Index: 1985=100.

*

May: 115.5

Source: Conference Board

Personal Spending

Seasonally adjusted annual rate, in trillions of dollars:

*

April: $7.04 trillion

Source: Commerce Department

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