Rising stock values and increased job prospects drove the Reuters/University of Michigan index of consumer sentiment to 88.3 in May from April’s eight-month low of 87.1 points. The increase came despite stagnant home prices and record gasoline costs, and makes it more likely that consumers will keep spending, according to Bloomberg News.
“Sentiment is less affected than in past periods by the surge in gasoline prices,” said Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Mass. “People have seen gasoline at more than $3 before, so it has less of a psychological impact.”
Consumers in the Michigan survey said they expect prices to increase at the same rate as in the previous month. They forecast an inflation rate of 3.3 percent in one year and 3.1 percent over the next five years, the same as in April.
Economists had forecast the index would rise to 88 points, according to the median of 60 estimates in a Bloomberg News survey. The survey’s expectations index, which some economists view as an indicator of future spending, rose to 77.6 from 75.9 in April.
Economists surveyed by Bloomberg News last month had lowered their projections for consumer spending this quarter and next because of falling home values and higher gasoline prices.
The Reuters/University of Michigan report’s gauge of current conditions, which reflects Americans’ perceptions of their financial situation and whether it’s a good time to buy big-ticket items like cars, rose to 105.1 points in May from 104.6 in April.
The Reuters/University of Michigan Surveys of Consumers is produced each month by the University of Michigan and distributed by Reuters. The preliminary report is based on a telephone survey of about 300 households; the final results, due June 1, will include about 500 responses. Additional information is available at www.sca.isr.umich.edu.
