Thomson Reuters and UM released the findings of the consumer survey, revealing that the consumer sentiment index improved to 79.3 percent in the month of May, an increase of 3.8 percent from April and 6.7 percent from May 2011. Consumer confidence has improved in each survey for the past nine months, but May's level is the highest since October 2007.
While falling gas prices helped calm worried consumers and restored confidence, the survey indicated that consumers were mostly encouraged by news of favorable employment trends despite the fact that the Labor Department recently reported a jobs slowdown. The survey also showed that fewer consumers reported of hearing about job losses in May than in any other monthly survey since mid-2007. It is speculated that continued growth in consumer confidence is going to depend largely on job growth.
In the past three surveys, a majority of consumers reported an improved economy, and many more said they expected conditions will improve, if only a modest amount. Despite this optimism, 41 percent of consumers said they have faith in the government's economic policies.
Few consumers expressed any concern about the impact of the European debt crisis on the United States' economy.
Survey of Consumers chief economist Richard Curtin said that he expects these kinds of results to continue for a few more months.
""The upbeat consumer reports on jobs could mean that more positive numbers will soon be reported by the government, or that consumers have yet again pushed their expectations beyond the likely performance of the economy,"" Curtin said. ""The most likely prospect is that job growth resumes at a modest pace and that confidence remains largely unchanged until after the November election and decisions about tax policy are made.""
Views on buying conditions for household durables (such as cars or home appliances) were also very positive, with 63% of consumers expressing a positive attitude toward new purchases. This result, the highest percentage in more than a year, was achieved with the increased availability of discounts on items. More households with incomes of $75,000 or higher-those most likely to purchase new vehicles-held a favorable view of purchasing a vehicle than last month or last year.
Yinbin Li, principal economist at IHS Global Insight, said that while the growth of consumer confidence is a positive thing, consumers aren't out of the woods yet.
""This is a good report,"" Li said. ""Consumer mood is slowly coming out of the ditch. However, there are still strong headwinds facing many American households such as rising student loan debt, a poor housing market, and weak wage growth.""