Americans' confidence in the economy jumped in May to a five-year high, lifted by rising home prices and more optimism about business conditions.
The Conference Board, a New York-based private research group, said Tuesday that its consumer confidence index rose in May to 76.2. That's up from a reading of 69.0 in April and the highest since February 2008.
Consumers' confidence in the economy is watched closely because their spending accounts for about 70 percent of U.S. economic activity.
The reports helped fuel a powerful rally on Wall Street. Traders were also encouraged by gains in overseas markets, especially in Japan and Europe.
The Dow Jones industrial average was up 148 points, about 1 percent, in early-afternoon trading. Broader stock indexes also jumped. The Dow has rocketed 18 percent this year:
Conference Board economist Lynn Franco said Americans are more optimistic after worrying earlier in the year about higher taxes and federal spending cuts.
Higher home prices and stocks gains are making Americans feel more confident.
And the job market has improved over the past six months. The economy has added an average of 208,000 jobs a month since November, well above the monthly average of 138,000 during the previous six months.
"U.S. consumers were decidedly more confident in May," said Jennifer Lee, senior economist at BMO Capital Markets. She attributed the gain to "steady job growth, record high equity markets and rising home values."
Unemployment has fallen to a four-year low of 7.5 percent. However, it’s important to note that a portion of the decline in unemployment is due to fewer people looking for work. The government counts people as unemployed only if they're actively searching for a job.
The economy grew at an annual rate of 2.5 percent in the January-March quarter, up from a rate of just 0.4 percent in the October-December quarter.
Here's the full press release:
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The Associated Press contributed to this report.