WASHINGTON (AP) — Americans’ confidence in the economy jumped in May to a five-year high, lifted by a better outlook for hiring, rising home prices and more optimism about business conditions. The increase suggests consumers may keep boosting economic growth this year.
The Conference Board, a New York-based private research group, said Tuesday that its consumer confidence index rose in May to 76.2. That’s up from a reading of 69.0 in April and the highest since February 2008.
The jump in confidence followed a separate report that showed the housing recovery is strengthening.
Home prices jumped 10.9 percent in March compared with a year ago, the most since April 2006, according to the Standard & Poor’s/Case Shiller 20-city index. All 20 cities showed year-over-year gains.
The reports contributed to a strong day on Wall Street. The Dow Jones industrial average surged more than 177 points in early morning trading. Broader indexes also jumped.
Consumers’ confidence in the economy is watched closely because their spending accounts for about 70 percent of U.S. economic activity.
Conference Board economist Lynn Franco said Americans are more optimistic after worrying earlier in the year about higher taxes and federal spending cuts.
Higher home prices and stocks gains are making Americans feel wealthier. That has offset some of the pinch from the tax increase and kept consumers spending.
And the job market has improved steadily over the past six months. The economy has added an average of 208,000 jobs a month since November. That’s well above the monthly average of 138,000 during the previous six months.
“U.S. consumers were decidedly more confident in May,” said Jennifer Lee, senior economist at BMO Capital Markets. She attributed the gain to “steady job growth, record high equity markets and rising home values.”
The unemployment has fallen to a four-year low of 7.5 percent. Some of the decrease is because many people have given up looking for work. The government counts people as unemployed only if they are actively searching for a job.
The overall economy grew at an annual rate of 2.5 percent in the January-March quarter, up from a rate of just 0.4 percent in the October-December quarter. The fastest expansion in consumer spending in more than two years drove economic growth in the first quarter.
Many economists expect growth is slowing slightly in the current April-June quarter to a rate of between 2 percent and 2.5 percent. But there is hope among some economists that growth will strengthen in the second half of this year, boosted by the gains in housing and employment.