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Published: Wednesday, 5/26/2010

Consumer confidence rises

A crowded New York department store is a sign of consumer confidence, but recent slowing of spending has spurred worries among economists that recovery could be stymied. A crowded New York department store is a sign of consumer confidence, but recent slowing of spending has spurred worries among economists that recovery could be stymied.

NEW YORK - Americans are feeling better about their job prospects, pushing consumer confidence higher in May. But signs that shoppers are slowing their spending as stocks fall could pose a roadblock to recovery.

Already, reports show retailers' business weakening in May after a solid spring season. Confidence's slow climb back to health could take a hit if the European debt crisis continues to shrink Main Street America's retirement accounts.

"It's disconcerting," Wells Fargo economist Mark Vitner said. "Weakness in the stock market is likely to impact spending on big-ticket items. During the first quarter, consumers splurged a bit. But I think they'll be pulling in their horns."

The Conference Board, based in New York, said yesterday that its Consumer Confidence Index rose to 63.3 from April's revised 57.7. Economists expected 59.

The increase was boosted by consumers' outlook over the next six months, one component of the index, which soared to the highest level seen since August, 2007, before the economy entered into a recession. Another component, which measures how shoppers feel about the economy, rose only slightly.

The overall index - which measures how consumers feel about business conditions, the job market, and the next six months - has been recovering fitfully since hitting an all-time low of 25.3 in February, 2009.

A reading above 90 indicates the economy is on solid footing; above 100 signals strong growth. Economists watch the number closely because consumer spending, including health care and other major items, accounts for about 70 percent of U.S. economic activity.

Economists already said confidence will remain weak for at least a year because of high unemployment.

But concern is growing that U.S. economic improvements, including in housing and consumer spending, could be reversed.

The Dow Jones industrial average plunged below 10,000 yesterday as investors worried about a global economic slowdown and tensions, but rebounded before its close, being down 22 points to 10,044.

The swings are already rattling some.

Lawrence Leritz was shopping for men's dress shirts in Macy's, sticking to the clearance racks.

The 50-year-old actor and choreographer has limited his spending on clothing as he becomes more concerned about the market.

Adding to the dark mood on Wall Street yesterday was a downbeat report from a key housing index.

The Standard & Poor's/Case-Shiller 20-city home price index fell 0.5 percent in March from February, a sign that the housing market remains weak even as mortgage rates are near historic lows.

There are worries that last month's expiration of the government's home buyer tax credit will hurt sales in the coming months.

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