The U.S. Conference Board’s Consumer Confidence Index, which increased sharply in April, posted a moderate increase in May. The reading came in 2.8 points higher at 83.8, more or less in line with expectations.

However, the component readings were sharply divided, with a strong improvement in the expectations index, coupled with weakness in the present conditions index.

“Today’s modest improvement contrasts the much stronger than expected University of Michigan consumer sentiment survey released earlier this month. This is most likely due to the greater sensitivity of the Conference Board measure to labour market conditions,” says RBC. “Though today’s increase is a positive sign, the small size of the increase does suggest that consumers remain hesitant.”

“The post-war rise in confidence has been decent, but not spectacular. The Fed will not regard this report as suggesting the economic pickup is gaining acceptable speed,” comments BMO Nesbitt Burns.

RBC notes that, despite only a moderate increase in confidence, the U.S. housing market continues to surprise on the upside with both new and existing homes rising above expectations. “New homes sold in April hit 1,028,000, up 17,000 from March’s revised number of 1,011,000, and well above consensus expectations of a 26,000 fall. Likewise, existing homes increased to 5.84 million above an expected 5.70 million in sales.”