NEW YORK (CNN/Money) - Consumer confidence in the United States slipped in April, a private research group said Tuesday, but exceeded the expectations of Wall Street economists and did little to change a picture of steady consumer spending at the end of the economy's first recession in a decade.

The Conference Board said its index of consumer confidence fell to 108.8 in April from a revised 110.7 in March. Economists surveyed by Briefing.com expected a confidence reading of 107.5.

"This month's retreat in confidence was caused primarily by a softening in consumers' assessment of current economic conditions," said Lynn Franco, consumer research director at the Conference Board. "Consumers' expectations remain virtually undaunted and signal continued expansion in the months ahead."

Separately, the Chicago Purchasing Managers Index, which measures manufacturing activity in the Chicago area, fell to 54.7 in April from 55.7 in March. Economists surveyed by Briefing.com expected a Chicago PMI of 55.0. An index reading below 50 signals a contracting manufacturing economy, while a reading above 50 suggests expansion.

U.S. stock prices rose after the report, while Treasury bond prices also rose.

The Conference Board's number is closely watched by Wall Street, but many economists have noted that the survey is notoriously volatile -- the index abruptly jumped in March to its highest level since August 2001 -- and doesn't always give a clear picture of how consumers are behaving.

"It's only vaguely predictive of what will happen with month-to-month consumer spending," said Peter Kretzmer, senior economist at Bank of America. "It did increase dramatically in March, so some drop-back is not unexpected."

The Conference Board's Present Situation Index, measuring how consumers feel about the current state of the economy, fell to 107 from 111.5 in March. The Expectations Index, measuring how consumers feel about the future, was nearly unchanged, dipping to 110 from 110.2

Consumer spending is critical to the U.S. economy, making up two-thirds of total gross domestic product (GDP). A strong gain in consumer spending in the fourth quarter helped offset a slowdown in business spending and helped GDP to grow 1.7 percent after shrinking 1.3 percent in the third quarter, meaning the common definition of a recession had been avoided.

GDP grew 5.8 percent in the first quarter of 2002, the Commerce Department said recently, but most of that growth was driven by a shift in the way businesses handled inventories.

Companies were left with a glut of unsold goods in 2001, and the process of getting rid of those inventories dragged on economic growth last year. The end of that inventory reduction helped boost economic growth in the first quarter, but continued growth will depend on renewed business spending and continued consumer spending.

"Consumers will continue to spend, and that will keep the economy chugging along for the next few months," said Oscar Gonzalez, economist at John Hancock Financial Services. "But without some help, I worry that consumers could begin to falter later in the year. We need more business spending to fuel the economy's shift into a higher gear and sustain the recovery."

One key to consumer confidence and spending this year will be the labor market. Unemployment rose to 5.7 percent in March, and more than a million jobs have been cut since March 2001.

Unemployment typically lags economic activity and is widely expected to rise to 6 percent this year, as skeptical businesses wait to be certain about the economic recovery before hiring new workers. The Labor Department reports on April unemployment on Friday, and economists surveyed by Briefing.com expect the rate to climb to 5.8 percent.

Consumers are only slightly less optimistic about the job market, according to the Conference Board. Of the 5,000 consumers surveyed, 22.4 percent expect more jobs to become available in the next six months, compared with 20.7 percent in March. But the number expecting fewer jobs also rose, to 14.7 percent from 13.5 percent.

"That's consistent with the idea that labor market conditions are not really improving yet," Kretzmer of Bank of America said. "They're not getting worse, either, but they've only stabilized."

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To boost consumer spending, the Federal Reserve cut its target for short-term interest rates 11 times in 2001, but it has left rates alone after two meetings in 2002. The Fed will eventually start to raise rates again, but uncertainty about the strength of the recovery, combined with low inflation and a soft labor market, will allow it to take its time in doing so.

Fed policy makers meet next Tuesday to discuss policy and are not expected to take any action. They are unlikely even to alter the statement announcing their rate decision; in March, they said the risks to the economy were balanced between a risk of economic weakness and a risk of inflation.