Muted cheer for US economy

Not all US economic news is positive

A flurry of unexpectedly cheerful economic news has raised hopes of a broad revival.

The Chicago Puchasing Managers' index, a measure of regional business activity, jumped in May and now indicates that manufacturing is starting to expand.

And consumer confidence, as calculated by the respected University of Michigan, registered a strong increase.

Taken together, the two indicators were enough to spark a 1% blip in the Dow Jones Industrial Average, to 8,829 points.

Optimists saw the combination of robust consumer confidence, and slowly increasing industrial activity, as evidence of a broad-based economic recovery.

But the picture was soured by weak consumer spending figures, which showed a 0.1% year-on-year decline in actual expenditure.

Confidence crunch

If demand remains weak, analysts said, any hope of recovery could be quickly dashed.

"Businesses are afraid there won't be enough demand, but by not hiring we may not be able to support the bounce we've seen in confidence," said Cary Leahey at Deutsche Bank Securities.

US unemployment is now as high as 6%, and economists say companies are wary of hiring, despite indications that the economy is in recovery.

If unemployment continues to increase, as many predict, it will restrict any potential for further increases in consumer confidence.

Consumer sentiment is vital for the US economy, which is highly dependent on individual spending.