Consumer Confidence Rebounds, % Planning to Buy "Major Appliance" at 9-year High

- Consumer Confidence for May rose to 108.0 versus estimates of 105.0 and an upwardly revised 106.3 in April.

BOTTOM LINE: An index of consumer confidence in the US jumped more than forecast in May as rising stock prices and a resilient labor market put Americans in a mood to spend. Better consumer sentiment raises the odds that the Fed’s forecast for accelerating economic activity will come to fruition. The Present Conditions component of the index rose to 136.1 from 133.5 the prior month. The Expectations component rose to 89.2 from 88.2 prior. The percentage of Americans that said jobs are hard to get fell to 19.9% from 20.4% in April. A 2.9% surge in the S&P 500 from the last week in April through May 22 also buoyed confidence. A $3.22/gallon nationwide average gas price on May 22 likely prevented an even greater jump in the reading.

34.4% of consumer said they plan to purchase a “major appliance,” the highest since May 1998 and up 10% from April. Moreover, this number has only been higher during 2 other months(March and May of 1998) over the last 19 years. This is very significant considering the percent that plan to purchase a major appliance is higher now than at any time during the peak of the recent housing boom. This is likely due to the fact that Americans’ net worth is at an all-time high as a result of the 106% gain in the stock market since the October 2002 bottom, a healthy job market, low interest rates, below average inflation and a 127.3% gain(Case-Shiller Home Price Index) in home prices over the last decade. These facts continue to be ignored by those that have expected consumer spending to fall off a cliff over the last couple of years as a result of housing.

The gain in the overall reading was spurred by a 19.2% jump in the Northeast Central region. However, the overall gauge continues to be skewed negatively by depressed confidence in the northern part of the country where most investment funds and major media outlets are located. Here is a breakdown of today’s Consumer Confidence reading by region:

Northeast Central 69.5 +19.2%

New England 74.6 -7.9%

Mid Atlantic 90.2 -8.3%

Northwest Central 99.5 -1.9%

Southeast Central 115.8 -.7%

South Atlantic 116.9 +.3%

Pacific 127.7 +7.7%

Southwest Central 130.5 +2.1%

Mountain 138.20 +1.5%