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A measure of U.S. consumer confidence jumped to its highest level in almost six years in May, lifted by rising home prices and record stock market gains. Greater confidence could help revive spending in coming months.
The University of Michigan said Friday that its consumer sentiment index rose to 84.5 in May, up from 76.4 in April and the highest since July 2007.
A better job market contributed to the rise in consumer optimism. And for the first time in five years, more consumers said their finances had improved rather than worsened.
Households with income above $80,000 reported the biggest gain in confidence. That’s likely due to the disproportionate benefit upper-income households receive from stock price gains. But confidence improved for all income groups.
Consumers cut back on spending in April for the first time in nearly a year, the Commerce Department said Friday. Some of the decline reflected lower gas prices. Adjusting for inflation, spending ticked up 0.1 percent, the smallest gain in six months.
Flat income in April also likely restrained spending.
Slower growth could lead the Federal Reserve to delay any scaling back in its bond purchases, which are keeping borrowing costs low.
Investors had been speculating that the Fed would start to slow its purchases in the next few months. That’s led to a spike in Treasury yields and higher interest rates.
Low inflation could also lead the Fed to continue its bond purchases.
The Fed’s preferred inflation gauge, which is updated as part of the consumer spending report, showed that prices fell 0.3 percent in April and increased just 0.7 percent in the past 12 months.
Still, rising consumer confidence could signal more spending in the months ahead. And the surge in home prices and stock values may make consumers feel wealthier and encourage more spending.
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