Consumer Confidence Soars As Factory Sector Stabilizes

US consumers felt more confident about the economy last month than at any time since the September failure of Lehman Brothers that pushed global banking to the brink of collapse, a survey showed on Friday.

Meanwhile, the factory sector shrank further last month but at a slower pace, suggesting some stabilization in the battered sector and the broader economy, according to an industry report. The report hinted at broad improvement in the manufacturing industries, despite the struggles in the US car industry.

The Reuters/University of Michigan Surveys of Consumers said its final index of confidence climbed to 65.1 in April from 57.3 in March. That was the highest since September 2008 and the biggest one-month increase since October 2006.

The April reading also marked the first yearly increase since July 2007. Economists polled by Reuters expected a slightly lower final reading of 61.9 for April.

The index of current economic conditions rose to 68.3 last month from 63.3 in March, the best reading in four months. The index of consumer expectations climbed to 63.1 from 53.5, also the highest since September of 2008.

"The improvement was concentrated in expectations for the future, especially the longer-term outlook for the economy," said Richard Curtin, the director of the survey.

Most of the gain can be tied to consumers' favorable assessment of U.S. President Barack Obama's stimulus spending, Curtin said.

The survey found that 65 percent of consumers thought the stimulus would improve the national economy.

Meanwhile, the Institute for Supply Management said its index of national factory activity rose to 40.1 in April from 36.3 in March. The median forecast among economists polled by Reuters was 38.0. A reading below 50 indicates contraction in the manufacturing sector.

ISM said the index has been below this threshold for 15 straight months, but it has been rising for four consecutive months.

If the ISM manufacturing index hits 44 by this summer, it could mean a stop in the shrinking in the overall economy, according to Ian Shepherdson, chief U.S. economist at High Frequency Economics.

"That's immensely significant, because 44 is consistent with stable GDP," Shepherdson wrote in a research note.

The report's new orders index jumped to 47.2 in April, the highest since August 2008, from 41.2 in March. Increased orders could mean fewer factory layoffs.

The employment component rose to 34.4 in April, its best showing since September, from 28.1 in March.

In a separate report, new orders received by U.S. factories declined in March, the seventh decrease in the last eight months, government data showed on Friday, signaling that the economic recession may be far from abating.

The Commerce Department said factory orders fell 0.9 percent in March after a revised rise of 0.7 percent in February.

Initially, February's gain was reported as much higher, at 1.8 percent, which ignited hopes that the manufacturing sector and the economy might be on the mend.

Economists polled by Reuters had expected a much smaller decrease in factory orders of 0.6 percent.

Orders for non-defense capital goods excluding aircraft, considered a measure of business confidence, were up a slim 0.4 percent in March, after jumping 4.1 percent the month before.

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