Consumer confidence rebounds sharply

NEW YORK (CNNMoney.com) -- Consumer confidence rebounded sharply in the latest survey released Tuesday, as consumers shrugged off record high gasoline prices and falling home values, focusing instead on gains in the stock market and a strong employment picture.

The survey by the business research group The Conference Board put its consumer confidence index at 108 for May, up from the 106.3 reading in April, which was revised up from an initial reading of 104. Economists surveyed by Briefing.com had forecast the index would be little changed at 104.5 in May.

Consumer confidence rebounded more than forecast in May, according to the latest survey.

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"The bounce-back in confidence was due primarily to a more upbeat assessment of present-day business conditions," said a statement from Lynn Franco, director of the group's Consumer Research Center.

Consumer confidence is considered a key to Americans' willingness to make purchases, and therefore is a key to the overall economy, since consumer spending fuels nearly three-quarters of all economic activity.

The index's two main components, the Present Situation Index and the Expectations Index, both showed gains. The Present Situation Index increased to 136.1 from 133.5 in April, while the Expectations Index edged up to 89.2 from 88.2.

"The short-term outlook remains cautious," said Franco. "All in all, confidence levels continue to suggest growth, albeit at a slow pace."

Those who told the survey that current conditions are "good" rose to 29.4 percent in May from 27.5 percent in April. That's more than twice the 14.5 percent who consider current conditions to be "bad."

As to the employment outlook, those claiming jobs are "plentiful" was unchanged at 29.0 percent in May, but that was well ahead of the 19.9 percent who said they were "hard to get." The percent of those expecting more jobs in the months ahead was relatively flat at 13.3 percent, slightly less than the 15.7 who believe there will be fewer jobs. That more negative view was also unchanged.

The unemployment rate in April edged up to 4.5 percent from 4.4 percent in March, as employers added 88,000 jobs. Forecasts for the May employment report, due to be released early Friday, are for a net gain of 135,000 jobs, with unemployment staying at 4.5 percent.

That mixed view on employment may have dampened consumers' expectations for their own paycheck, as those expecting their incomes to increase in the six months ahead declined to 17.7 percent from 18.4 percent in April.

But even with those modest expectations on job and income gains, those who saw business conditions improving in the next six months increased to 15.1 percent from 13.8 percent. But those looking for conditions to worsen also edged up to 10.1 percent from 9.7 percent.

The economy grew at an annual rate of 1.3 percent in the first quarter, the slowest growth in four years, according to the government's initial reading. Economist are forecasting that will be revised down to a paltry 0.7 percent rate of growth when the government updates its estimate Thursday.