Consumer Confidence Index rises in April

Americans' confidence in the economy grew in April as fears about the job market eased, outweighing the pain from rising prices at the gas pump.

Americans' confidence in the economy grew in April as fears about the job market eased, outweighing the pain from rising prices at the gas pump.

The increase comes after an unexpected drop in March. But the measure had risen for five consecutive months before that to hit a three-year high in February.

The Conference Board said Tuesday the index rose to 65.4 from a revised 63.8 in March. Economists expected a smaller rise to 64.8, according to FactSet.

The index is still far from the reading of 90 that indicates a healthy economy. It hasn't approached that level since the recession began in December 2007, even though the recession officially ended in June 2009.

Still, the index's 40-point increase since its all-time low of 25.3 in February 2009 reflects how far the economy has come.

"Consumer's short-term outlook improved slightly, suggesting that the uncertainty expressed last month is easing," said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement. "Inflation expectations, which had spiked, retreated somewhat in April."

Consumer confidence can remain in the doldrums long after a recession ends. For example, the recession of the early 1990s ended in March 1991, according to the National Bureau of Economic Research, but consumer confidence didn't rise above 90 until three years later.

The labor market often plays an outsize role in how quickly consumer confidence improves after a recession.

"People define their financial well-being by whether they have a job and if everyone in their household or in their family has a job," said Deloitte Chief Economist Carl Steidtmann. "When people are employed, that adds to confidence."

In addition, two of the five questions that make up the Conference Board index ask about employment prospects.

Economists monitor confidence because consumer spending, including big-ticket items such as housing and health care, accounts for about 70 percent of U.S. economic activity and is critical for a strong rebound.

The Conference Board survey, which is conducted by The Nielsen Co. and based on a random survey mailed to 3,000 households between April 1 and April 14, showed that the proportion of consumers expecting an increase in their income improved to 16.7 percent from 15.2 percent.

Consumers' assessment of the labor market improved modestly as well. Those saying jobs are "hard to get" fell to 41.8 percent from 44.4 percent, and those saying jobs are "plentiful" rose to 5.2 percent from 4.6 percent.

Chris Christopher, an economist with IHS Global Insight, says the data backs up that improvement. He said last month's shaken consumer confidence could have had more to do with unrest in Libya and Japan's earthquake and tsunami rather than fundamental worry over the economy.

"People lowered their expectations, and now they're bouncing back a little bit," he said. "Their evaluation of the current situation is stronger, and that jibes with employment numbers we are seeing."

Companies added more than 200,000 jobs in March for the second straight month, according to the government's jobs report released this month, the first time that has happened since 2006. The unemployment rate fell to a two-year low of 8.8 percent and has dropped a full percentage point since November.

Another encouraging sign, Steidtmann said: consumers planning to buy a house in the next six months rose to 5.5 percent from 4.1 percent, the highest level since 1978.

The housing market could use the boost. Home prices are at their lowest level since the housing bubble burst in 10 major markets, according to The Standard & Poor's/Case-Shiller 20-city index, also out Tuesday. The index fell for the seventh straight month.

Still, Americans are facing high costs for gas and food, and although expectations about inflation fell during the month, they are still above what they were in October.

The national average gas price is at about $3.87 per gallon and prices have increased for 35 straight days. As summer hits and Americans travel more, concern over high gas prices could increase.

Overall, shoppers' outlook over the next six months improved slightly. The part of the Consumer Confidence Index measuring those expectations rose to 82.6 from 81.3 last month.

The index's other gauge, which measures how consumers feel now about the economy, improved to 39.6 from 37.5 in February. It was the seventh straight month that measure improved.

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