28 May 2013 17:25 [Source: ICIS news]
WASHINGTON (ICIS)--US consumer confidence is on the mend and reached a five-year high in May, a key survey reported on Tuesday, with economic expectations back at a level last seen before the 2008-2009 recession took hold.
The positive upturn in consumer confidence helped power sharp gains on Wall Street.
The index had also seen an upwardly revised 7.1-point improvement in April from March.
Lynn Franco, director of economic indicators at the Conference Board, said that “consumer confidence posted another gain this month and is now at a five-year high”.
The May reading of 76.2 is just shy of the February 2008 index level of 76.4.
Although the 2008-2009 Great Recession actually began in December 2007, its impact was not immediately apparent to consumers until later in 2008. The recession ended in June 2009.
“Back-to-back monthly gains suggest that consumer confidence is on the mend and may be regaining the traction lost due to the fiscal cliff, the payroll tax hike and the sequester,” Franco said.
Consumer confidence is critical to the health of the US economy because spending by households is the principal engine of the nation’s output, accounting for as much as 70% of all commercial activity and production.
The Conference Board, a 96-year-old business analysis group in New York City, said that consumers’ appraisal of current business conditions also improved in May.
Those saying that business conditions are good increased to 18.8% from 17.5% in April, while those saying they are bad declined to 26% from 27.6% in the prior month. While expectations for business are still low, the improving trend is seen as significant.
The survey also showed that consumers are more confident about the employment market. That is important because even those with jobs are likely to hold back on spending if they are worried about potential layoffs.
In one narrowly negative reading, the survey showed that consumers are slightly less confident that their incomes will increase in months ahead.
Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy
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