Consumer confidence soars more than expected in May

— -- Consumer confidence soared to the highest level in eight months in May, trouncing analysts' estimates, as Americans grew optimistic that the job market and business conditions will improve before year's end.

But another report released Tuesday showed that prices of single-family homes are still falling sharply, which will help curb consumer spending.

While the Conference Board's consumer confidence index is still weak by historical standards, Americans think "the worst is now behind us," says Lynn Franco, head of the board's Consumer Research Center.

The broad measure of consumer sentiment jumped to 54.9, up from 40.8 in April, surpassing analysts' average forecast of about 43 and marking the biggest monthly increase in six years. It was the third jump in a row after the index hit a record low in February.

"Looking ahead, consumers are considerably less pessimistic than they were earlier this year," Franco says.

By comparison, the consumer index was 90.6 in December 2007, when the recession began.

The large April increase helped drive up the Dow Jones industrial average more than 2% in Tuesday trading.

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Consumers' attitudes about the current economy edged up slightly but are still poor amid waves of layoffs that have pushed unemployment to 9%, rising foreclosures and tighter credit standards. About 45% of consumers say jobs are "hard to get," down from about 47% in April.

But the so-called expectations index leapt to 72.3 from 51. Consumers have been encouraged by a Dow that has surged nearly 30% since early March and the slower pace of job losses.

Despite the mildly positive news, confidence is still "well below its average in prior recessions," says Steven Wood, chief economist for Insight Economics.

Brian Bethune, chief U.S. economist at IHS Global Insight, says falling home prices and tight credit are holding down consumer spending. In March, home prices fell 18.7% vs. a year earlier, according to Standard & Poor's/Case-Shiller index, which tracks 20 cities.