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U.S. Consumer Confidence Jumps to Highest Level Since September

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U.S. Consumer Confidence Jumps to Highest Level Since September


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By Shobhana Chandra
May 26 (Bloomberg) -- Confidence among U.S. consumers jumped this month to the highest level since September, reflecting growing perceptions that the job market will improve.
The Conference Board’s sentiment index surged to 54.9, higher than forecast and the biggest gain since April 2003, the New York-based research group said today. Another report showed home prices continued to plunge.
Recent jumps in the stock market, low mortgage rates and smaller job losses are brightening consumers’ outlooks and fueling forecasts that the economy will return to growth in the second half of the year. Still, the loss of wealth from the slump in real estate values and still-tight credit may temper a comeback in consumer purchases, muting the recovery.
“News that things are improving in the economy is helping consumer sentiment,” James Knightley, an economist at ING Financial Markets in London, said before the report. “We’ve seen stock prices rise in recent weeks and mortgage rates have fallen.”
Consumer confidence was projected to rise to 42.6, according to the median estimate in a Bloomberg News survey of 70 economists. Forecasts ranged from 38.5 to 47. The index averaged 57.95 last year.
The Conference Board revised the April reading up to 40.8 from an originally reported 39.2.
A report from S&P/Case-Shiller earlier today showed home prices in 20 U.S. metropolitan areas fell a more-than-forecast 18.7 percent in March from the same month last year, as foreclosures surged.
Expectations Jump
The Conference Board’s measure of present conditions increased to 28.9 from 25.5 the prior month. The gauge of expectations for the next six months jumped to 72.3, the highest level since December 2007.
The share of consumers who said more jobs will be available in the next six months climbed to 20 percent, the most in more than five years. The proportion of people who said they expect their incomes to rise over the next six months rose to 10.2 percent from 8.3 percent.
The proportion of people who said jobs are currently hard to get fell to 44.7 percent from 46.6 percent. The share saying jobs are plentiful now increased to 5.7 percent from 4.9 percent.
“As far as consumers are concerned, the worst is now behind us,” Lynn Franco, director of the Conference Board’s consumer research center, said in a statement.
Other Measures
Today’s confidence figures corroborate other reports. The Reuters/University of Michigan preliminary index of consumer sentiment rose this month to the highest level since before the collapse of credit markets last year worsened the recession.
Economists say the Conference Board’s index tends to be more influenced by attitudes about the labor market.
Payrolls in April fell by 539,000, the fewest in six months, and first-time claims for jobless benefits are slowing. Still, the unemployment rate jumped to a 25-year high of 8.9 percent in April and a Bloomberg survey showed this month that it may climb to 9.6 percent next year.
The economy has lost 5.7 million jobs since the slump began in December 2007.
Recent data show home sales stabilizing near record-low levels and demand is likely to get a further boost from tax credits for first-time buyers and Federal Reserve efforts to trim mortgage rates.
Lower-priced merchandise is drawing shoppers as they focus on essentials and conserve cash. Ross Stores Inc., owner of the Ross Dress for Less discount chain, last week raised its sales and earnings estimates for this quarter and second half of 2009.
“Consumers are continuing to respond very favorably” to the chain’s offerings, Chief Executive Officer Michael Balmuth said on a May 21 conference call with analysts. Still, “the economic and retail climate remains difficult.”
To contact the reporter on this story: Shobhana Chandra in Washington at [email protected]
Last Updated: May 26, 2009 10:00 EDT
 
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