By Anne D'Innocenzio, AP Retail Writer
NEW YORK (AP) — 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 on the path 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," said Wells Fargo economist Mark Vitner. "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 Tuesday that its Consumer Confidence Index rose to 63.3, up from April's revised 57.7. Economists surveyed by Thomson Reuters had 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 in a recession. Another component, which measures how shoppers feel about the current 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% of U.S. economic activity.
Economists already believed confidence will remain weak for at least another year because of stubbornly high unemployment. But concern is growing that U.S. economic improvements, including in housing and consumer spending, could be reversed. The Dow Jones industrials plunged below 10,000 Tuesday as investors worried about a global economic slowdown and tensions between North and South Korea.
The Dow fell more than 250 points in the minutes after the opening bell and spent most of the day under 10,000 before roaring back late in the day, closing down 22 points to 10,043.75. Still, no one believed the market's turbulence was over.
Lynn Franco, director of The Conference Board Consumer Research Center, said it's too soon to know whether Wall Street's swings will rattle confidence. It depends on how long the volatility lasts and whether stock declines are offset by job gains, she said.
"It doesn't directly hit home, but it could hit home," Franco said.
For some, it already has.
Lawrence Leritz was shopping for men's dress shirts in Macy's, sticking to the clearance racks, on Tuesday. The 50-year-old actor and choreographer has limited his spending on clothing as he becomes more concerned about the market.
"It's hard not to feed into (the fear) because you see your account getting back to normal, and then dropping down again," he said. "It's a big tease."
Adding to the dark mood on Wall Street Tuesday was a downbeat report from a key housing index. The Standard & Poor's/Case-Shiller 20-city home price index fell 0.5% 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.
In fact, the Conference Board survey of consumers showed that intentions to buy a car rose, while plans to buy major appliances and a home slipped, apparentely reflecting the expiration of the homebuyers' tax credit at the end of April.
Reports of weakening business in May comes as two positives — easing gas prices and declining mortgage rates — could put more money into shoppers' pockets.
But declining gas prices haven't caused Steve Schaub of Indianapolis to spend more.
"It doesn't change what I do during the week and on weekends," said Schaub, noting a still-shaky economy has made him hold off getting his house painted and buying a new roof.
The Conference Board survey — based on a random survey of consumers sent to 5,000 households from May 1-18 — includes volatile days in the stock market, but excludes the 376-point plunge last Thursday, its worst one-day drop in more than a year.
"We were starting to see some good signs that we were building momentum" in spending, said Dennis Jacobe, chief economist at Gallup, whose recent daily polls have picked up deteriorating confidence among shoppers. "The momentum has come to a halt."
AP Real Estate Writer J.W. Elphinstone and AP Retail Writer Emily Fredrix in New York and AP Business Writer Tom Murphy in Indianapolis contributed to this report.
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