Consumer Confidence Index Rises in April

A Kmart department store sign reads "Now Hiring," Tuesday, April 25, 2006 in New York. The Labor Department reports on weekly jobless claims Thursday. (AP Photo/Mark Lennihan) (Mark Lennihan - AP)

NEW YORK -- The U.S. economy showed signs of resilience on Tuesday, despite rising prices at the gas pump, adding fuel to speculation that the Federal Reserve would continue on its course of raising interest rates.

A widely watched barometer of consumer confidence rose in April to its highest level in almost four years, according to a private research group. And sales of previously owned homes edged up slightly in March after rising in February, too.

Analysts said that if fuel prices continue to rise and the economy remains buoyant, the Fed may have more reasons to keep tightening credit policy to choke off inflation. The combination of higher interest rates and more expensive fuel could cast a pall on consumer spending, which accounts for two-thirds of all U.S. economic activity.

"The increases (in gas prices) looks like it's hitting a critical level," said Gary Thayer, chief economist at A.G. Edwards & Sons Inc., pointing out that it will be harder for the recent improvement in the job market to outweigh the concerns about gasoline prices.

The Conference Board said that its consumer confidence index rose to 109.6, up from a revised 107.5 in March. April's reading was the highest since the index touched 110.3 in May 2002. Analysts had expected a reading of 106.4.

Confidence has been on an upswing since November in the aftermath of the Gulf hurricanes, except for a sharp dip in February when short-lived pessimism over the labor market soured consumer sentiment.

"Improving present-day conditions continue to boost consumers' spirits," said Lynn Franco, director of The Conference Board Consumer Research Center in a statement. "Recent improvements in the labor market have been a major driver behind the rise in confidence in early 2006. Looking ahead, consumers are not as pessimistic as they were last month."

Franco added, however, that "while prices at the pump have yet to impact confidence, further increases could dampen consumers' mood."

The component of the consumer confidence index that measures how consumers feel now about economic conditions rose to 136.2 from 133.3. Another component, which measures consumers' outlook over the next six months, improved to 91.9 from 90.3 last month.

Meanwhile, the housing market boom that helped fuel consumer confidence for the past few years is limping along.

The National Association of Realtors reported Tuesday that sales of existing homes edged up a meager 0.3 percent last month to a seasonally adjusted annual rate of 6.92 million units.

The March increase followed a bigger 5.1 percent jump in February. The two months marked the first advances after five consecutive monthly declines.