Consumers, Investors, Economists all Upbeat

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Consumers, Investors, Economists all Upbeat

NEW YORK -- Finally there appears to be some agreement between consumers and economists on the state of the economy. After a year and a half of recession and nine months of news about the world’s financial crises, consumers and investors are embracing what good news they can find about the economy.

At the same time, a new survey of leading economists indicates the end of the recession is in sight, according to a CNN/Money report.

Tuesday, the Conference Board reported the third straight monthly rise in its familiar Consumer Confidence Index, and the biggest jump since April 2003. The stock market seemingly surged as a result, with major indices up more than 2 percent. The Dow industrial average rose 196.17, to 8,473.49.
Meanwhile, as the economy shows signs of stabilizing, the National Association for Business Economics Outlook released a report Wednesday, which said the recovery will be more moderate than is typical following a severe downturn.

In the Conference Board’s May survey of 5,000 households, the overall Consumer Confidence Index rose to 54.9—its highest level since September, when the collapse of Lehman Bros. and calls for bailouts made "financial meltdown" part of the everyday lexicon.

But more impressive was the rise in expectations for how the economy would look six months down the road. Despite the continuing rise in joblessness, the index's subset known as the Expectations Index leapt more than 21 points in May to 72.3, its highest since December 2007—the month the U.S. economy fell into recession.

Economists believe the Conference Board survey data are useful in gauging consumers' sentiments, and consumers' sentiments in turn are important to the health of an economy in which consumers account for two-thirds of spending, according to The Associated Press.

The Expectations Index is based on replies to three questions about people's expectations for how the economy will look in six months with regard to employment, family income and business conditions. In each case, respondents are asked to say whether their expectations are positive, negative or neutral.

Despite the relative optimism, consumer sentiment is far from heralding a recovery. The Expectations Index last topped 100—its 1985 benchmark—in January 2005. The overall Consumer Confidence Index has not topped 100 since August 2007.

The National Association for Business Economics (NABE) Outlook’s panel of 45 economists said it expects economic growth will rebound in the second half of 2009. However, the group still expects to see a decline in second-quarter economic activity.

"The good news is that the NABE panel expects economic growth to turn positive in the second half of this year, with the pace of job losses narrowing sharply over the remainder of this year and employment turning up in early 2010," said NABE President Chris Varvares in a written statement.

Almost three out of four survey respondents expected the recession will end by the third quarter of 2009, the report said. But 19 percent predicted that a turnaround won't come until the fourth quarter, and 7 percent said it may not come until early 2010. None of the panelists expected the recession to continue past the first quarter of next year, according to the CNN/Money report.

Related News:

Slow Turnaround in Economy Not Changing Consumer Shopping Habits -- May 14, 2009

Exclusive Nielsen Report: Global Consumer Confidence Hits a New Low -- April 23, 2009