NEW YORK -- Consumer confidence snapped back nearly 6 points in May, following a sharp decline in April, as consumers became increasingly optimistic about the economy and job prospects.
The Conference Board's Consumer Conference Index, a leading indicator of consumer sentiment toward spending, rose to a better-than-expected 115.5 in May from a revised 109.9 in April.
While soaring energy prices and a wave of corporate layoffs stunted confidence, the latest findings indicate consumers are indeed becoming more upbeat about the prospects of an economic recovery.
Commented John Lonski, economist, Moody's Investors Services here, "We have yet to see deterioration of consumer confidence that might worsen the latest slowdown in household expenditures. Consumer gloom is not likely to trigger ... an even slower economy."
Lynn Franco, director of the Conference Board here, said, "Latest findings report rising confidence about job prospects over the next six months, but reveal growing concerns about the current job market."
Unemployment rose to 4.5% in April from 4.3% in March and Lonski said he expects it to rise to 4.6% in May.
Yet Franco noted that there are no indications that consumers will curtail their spending, "which points to continued economic growth."
The biggest gain in the monthly report came in its reading of consumers' assessment of future business conditions. The Expectations Index -- a measure of consumer sentiment for the short term -- rose to 86.8 from 79.1, the highest reading this year. Those expecting an upswing in business conditions increased to 16.8% from 14.1% while the percentage of consumers anticipating worsening conditions dipped to 13.5 from 14.5.
The employment outlook was also more upbeat. Now 13.8% of consumers expect more jobs to become available, up from 12.3%. Those expecting fewer jobs to open declined to 19.9% from 22.9%. American families also are more upbeat about their incomes, with 24.6% looking for their incomes to improve, from 22.7% in April.
Consumers' attitudes toward today's conditions also improved. The Present Situation Index -- which measures current consumer sentiment -- rose to 158.6 from 156.0 in April. The percentage of consumers who rated current business conditions as "good" increased to 30.7 from 28.2. Consumers rating conditions as "bad" decreased to 11.8% from 13.2%. Consumers claiming jobs were "hard to get" rose to 14.7% from 14.2%. Those reporting jobs were plentiful fell slightly to 39.5% from 40.1%.
The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. The index compares results to its base year, 1985, when it stood at 100, and is considered a key measurement of consumer spending, which comprises two-thirds of the nation's economy.
Lonski said he was "amazed" with May's significant gain from April despite consumers' sour assessment of current job conditions. Lonski said he expected the index to register 111.0.
The confluence of an approved $1.35 trillion 10-year tax cut, a series of interest rate reductions, and rejuvenated equity markets "just might do the trick to keep the U.S. from further economic harm," Lonski said, adding that perhaps consumers sense the Fed will again succeed at limiting the severity of the economic slowdown.
Still, consumer confidence is down 20.2% for May, when the Index peaked at 144.7, indicating that while spending has improved, it will not grow as rapidly as long as unemployment is rising, making for a more difficult retail environment.