US consumers felt much more upbeat about the economy last month, a month when the country’s manufacturing sector also appeared to be crawling out of a deep recessionary hole, reports showed on Friday.
The news was fresh evidence that the US economy may be on a slow path to recovery, helped by a huge government stimulus package and the US Federal Reserve’s efforts to prop up the banking sector.
The Reuters/University of Michigan survey of consumers said its final index of confidence climbed to 65.1 last month from 57.3 in March.
“The improvement in consumer sentiment is encouraging — consistent with our forecast for a gradual pickup in spending,” said Michelle Meyer, an economist at Barclays Capital.
The index reached its highest since September 2008, when the collapse of investment bank Lehman Brothers Holdings Inc set in motion a crisis that rocked the financial system and pushed the economy, already in recession, into an even deeper downturn.
Much of the gain in the consumer survey was attributed to a thumbs-up for US President Barack Obama’s US$787 billion stimulus plan, said Richard Curtin, director of the Reuters/University of Michigan survey.
The survey also found that 65 percent of consumers thought the stimulus would improve the national economy.
Rising US stock markets last month — the Standard & Poor’s 500 index gained 9.4 percent, its biggest monthly rise in nine years — were also seen boosting sentiment as well as deep discounts from retailers and in the housing market that have improved buying conditions, Meyer said.
Meanwhile, the Institute for Supply Management’s closely watched index of manufacturing activity jumped to 40.1 in April from 36.3 in March.
While the index remains below 50, the level that separates contraction from expansion, it touched its highest point in six months and is riding a four-month streak of gains from December’s low of 32.9.
“Most of the indicators showed a solid improvement, and even though they are still solidly in a zone associated with recession, they are nowhere near the deep recession/depression type levels feared a few months back,” said Alan Ruskin, chief international economist at RBS Greenwich Capital in Greenwich, Connecticut.
Many economists look at the ISM survey’s “new orders minus inventories” as a leading indicator for factory output.
The measure turned positive in March and continued to rise last month, to its fastest rate of new orders growth versus inventories since December 2004.
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