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Business Title: U.S. Michigan Consumer Sentiment Index Rose in May By Shobhana Chandra May 28 (Bloomberg) -- Confidence among U.S. consumers rose more than forecast in May, a sign the biggest part of the economy will help strengthen the recovery. The Thomson Reuters/University of Michigan final index of consumer sentiment increased to 73.6, higher than the 73.3 median estimate in a Bloomberg News survey of economists, from 72.2 in April. It was also up from the preliminary May reading of 73.3. The figure shows Europe’s debt crisis that triggered a slump in stock prices this month has had limited effect on confidence. Job growth from January through April also may bolster consumer spending, allowing the recovery to broaden and become more sustainable. “Important fundamentals, like resumption of job growth and rising wealth, are helping consumers get back in the game,” said Richard DeKaser, chief economist at Woodley Park Research in Washington, who had forecast the May index to rise to 73.8. “Any step forward is good news.” A separate report from the Commerce Department showed consumer spending unexpectedly stalled in April as Americans used growing wages to rebuild savings. No change in spending compared with a 0.3 percent increase projected by economists surveyed by Bloomberg and followed a 0.6 percent gain in March. Incomes rose 0.4 percent for a second month. Business activity in the U.S. rose for an eighth month in May, according to a report today from the Institute for Supply Management-Chicago Inc. The group’s business barometer fell to 59.7 from an April reading of 63.8, which was the highest in five years. Figures greater than 50 signal expansion. Stocks Fall Stocks fell after the reports, with the Standard & Poor’s 500 Index dropping 0.2 percent to 1,100.86 at 10:36 a.m. in New York. The 10-year Treasury note rose, pushing down the yield 2 basis points to 3.34 percent. Estimates for the Thomson Reuters/University of Michigan measure ranged from 71 to 75, according to the Bloomberg survey. The gauge of current conditions, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars, held at 81 in May. The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, rose to 68.8 from 66.5. Consumers in the survey said they expect an inflation rate of 3.2 percent over the next 12 months, compared with 2.9 percent in April. Five-Year Inflation Over the next five years, the figures tracked by Federal Reserve policy makers, Americans expected a 2.9 percent rate of inflation, compared with 2.7 percent the prior month. The economy has added jobs each month so far this year following the worst employment slump since World War II. Payrolls probably rose again this month after increasing in April by the most in four years, economists in a Bloomberg survey projected ahead of a June 4 report from the Labor Department. Even so, the unemployment rate will end the year at 9.4 percent, according to the median estimate in a monthly Bloomberg survey. “Unemployment is the single largest inhibitor to consumer confidence,” Dennis May, chief executive officer of Hhgregg Inc., said in an interview yesterday. The Indianapolis-based chain of consumer electronics stores received 26,000 applications for 1,400 jobs, he said. “The stock market can do well, but if I’m out of work, then my purchasing habits are certainly going to be restricted,” May said. Retail Spending Businesses seeing a pickup in spending include AutoZone Inc., the biggest U.S. auto-parts retailer. The Memphis, Tennessee-based company reported third-quarter profit that exceeded analysts’ estimates. Tax refunds spurred consumer purchases of car mats, radios and cleaning supplies, boosting AutoZone’s revenue, Chairman and Chief Executive Officer Bill Rhodes said. “Coming out of winter, there’s more demand that’s pent up,” Rhodes told analysts on a conference call on May 25. Some figures point to a cooling in sales. The New York- based International Council of Shopping Centers cut its estimate for May retail sales at stores open at least a year, after consumers pulled back on discretionary spending. The pace of store visits was “uneven” and consumer spending “softer,” Mike Niemira, the ICSC’s chief economist, said in a statement on May 25.
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