Consumer sentiment is definitely healing. In May, Confidence climbed further, according to the Conference Board. The Consumer Confidence Index now sits at 63.3, up from 57.7 in April. It has increased for the past three months, as it dipped all the way down to 46 in February. This is the best consumer sentiment we've seen since March 2008. It also soundly beat economists' expectations of 59.0. The report contains even more good news.
But before getting into that, here's the miniature chart that the Conference Board provides:
This begins to show just how much confidence has risen recently. If this trend continues, we'll soon hit pre-recession levels of confidence.
Speaking of pre-recession levels, that's where the Conference Board's expectations index stood in May. It rose to 85.3 from 77.4 in April. Of course, expectations prior to a recession aren't necessarily impressive. Indeed, the confidence reading, though rising, is still weak by historical levels. So good times aren't exactly here again for U.S. consumers, but they clearly feel a lot better than they had during most of the recession. And the expectations index shows their optimism.
Yet, the market today, and over the past few weeks, poses a nagging question: can this consumer recovery really take hold? The Dow is down 12% since its April high of 11,205. The housing market is also showing signs of weakness now that the government credit has ended. And that doesn't even begin to take into account all of the instability overseas with conflict in the Koreas and sovereign debt crises plaguing Europe. So far, consumers haven't let any of that get to them. But if those worries mount, they could begin to pull back again.
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