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2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

Consumer Sentiment Hits Eight-Month High

Consumer sentiment about the state of the U.S. economy soared in early May to its highest level since September, just before Lehman Bros. collapsed and the cascade of panic began, according to a widely watched index.

The Reuters/University of Michigan Surveys of Consumers , out this morning, is made up of two components: A survey of how consumers feel about the economy right now and how they feel about its prospects going forward.

The index of current economic conditions actually ticked down slightly from April. But the expectations index rose sharply enough to pull the entire index up to its highest level since September.

This means: Consumers still understand times are hard right now but they feel better than they have in a long time that the hard times will come to an end soon. This jibes with the relationship between the stock markets and unemployment.

The markets have surged since early March, even as unemployment has been going up -- and likely will continue to rise. That's because the stock market is based on expectation of performance, and unemployment is a real-time measure of the economy. As such, it is known as a "lagging indicator" of the economy's overall health.

Consumer spending accounts for about 70 percent of ultimate U.S. GDP. Low consumer confidence leads to more saving and less spending, grinding the economy to a halt.

-- Frank Ahrens
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By Frank Ahrens  |  May 29, 2009; 12:02 PM ET
Categories:  The Ticker  | Tags: consumer confidence, unemployment  
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