Consumer Sentiment Up to Post-Recession Peak

WASHINGTON (MarketWatch/MCT) -

Consumer sentiment perked up in May to its highest level in more than six years, according to a survey released Friday, helped by falling gasoline prices, a rising stock market and firmer housing prices.

The preliminary May reading of the University of Michigan and Thomson Reuters consumer sentiment index jumped to 83.7, well up from 76.4 in April and the best reading since July 2007, according to news reports.

Economists polled by MarketWatch expected a 77.5 reading.

Sentiment can be volatile from month to month, but a number of factors have helped confidence, from falling gasoline prices to a rising stock market to a recovering housing market.

“Cheaper gasoline prices, and low inflation in general, may be providing enough of an offset to the hit from higher payroll taxes that came at the start of the year,” said Avery Shenfeld of CIBC World Markets.

Rising employment – payrolls have grown an average of 208,000 in the past six months – also has helped, even as the jobless rate remains elevated.

The relationship between consumer sentiment and actual retail spending can be spotty, however.

“If sustained at its current level, the outlook index is consistent with real consumers’ spending rising by about 2.5 percent year-on-year, not bad but still not great,” said Ian Shepherdson of Pantheon Macroeconomic Advisors.

Separately, the leading economic index bounced back, with a 0.6 percent gain to 95 in April, after falling a downwardly revised 0.2 percent in March, the Conference Board said Friday.

Economists polled by MarketWatch had forecast a 0.3 percent increase.