Economy Shrugging off Spring Slowdown, Reports Suggest

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Natalie Behring/Bloomberg via Getty Images

By Leah Schnurr and Lucia Mutikani

NEW YORK -- U.S. consumer sentiment rebounded in early May to the highest level in nearly six years as Americans felt better about their financial and economic prospects, particularly among upper-income households, a survey released on Friday showed.

The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment rose to 83.7 from 76.4 in April, topping economist expectations for 78.

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It was the highest level since July 2007.

The barometer of current economic conditions jumped to 97.5 from 89.9, the highest since October 2007, while the gauge of consumer expectations gained to 74.8 from 67.8.

More consumers gave a favorable view of their personal finances than in anytime since 2007, with the largest gains among households in the upper third of income levels. More respondents also thought the economy would continue to improve in the year ahead.

Shopping plans were similarly encouraging, with the gauge of buying attitudes for durable goods rising to 148 from 137.

The survey's one-year inflation expectation was unchanged at 3.1 percent, while the survey's five-to-10-year inflation outlook edged down to 2.8 percent from 2.9 percent.

Economic Indicators Also on the Rise

A separate report released Friday showed U.S. economic activity in April rose to its highest level in nearly five years as firming housing and labor market conditions offset weakness in manufacturing, suggesting an anticipated growth slowdown would be temporary.

The Conference Board said Friday that its Leading Economic Index increased 0.6 percent to 95.0 last month, the highest level since June 2008. The index had slipped 0.2 percent in March.

Economists polled by Reuters had expected the index to rise only 0.2 percent in April.

Economic activity is expected to slow in the second quarter as the effects of higher taxes and deep government spending cuts kick in. However, housing and employment are showing some resilience, while manufacturing is showing some strain.

"The biggest positive factor is the potential for improvement in the recovering housing and labor markets," Ken Goldstein, an economist at the Conference Board, said in a statement. "The biggest unknown is the resiliency in confidence, both consumer and business."