Americans' confidence in the economy jumped in May to a five-year high, lifted by a better outlook for hiring, rising home prices and more optimism about business conditions. The increase suggests consumers may keep boosting economic growth this year.
The Conference Board, a New York-based private research group, said Tuesday its consumer confidence index rose in May to 76.2. That's up from a reading of 69.0 in April and the highest since February 2008. The jump in confidence followed a separate report that showed the housing recovery is strengthening.
Consumers' confidence in the economy is watched closely because their spending accounts for about 70 percent of U.S. economic activity. Conference Board economist Lynn Franco said Americans are more optimistic after worrying earlier in the year about higher taxes and federal spending cuts.
Higher home prices and stocks gains are making Americans feel wealthier. That has offset some of the pinch from the payroll tax increase and kept consumers spending. And the job market has improved steadily over the past six months. The economy has added an average of 208,000 jobs a month since November. That's well above the monthly average of 138,000 during the previous six months.
The overall economy grew at an annual rate of 2.5 percent in the January-March quarter, up from a rate of just 0.4 percent in the October-December quarter. The fastest expansion in consumer spending in more than two years drove economic growth in the first quarter.
Many economists expect growth is slowing slightly in the current April-June quarter to a rate of between 2 percent and 2.5 percent. But there is hope among some economists that growth will strengthen in the second half of this year, boosted by the gains in housing and employment.