U.S. confidence rising but auto sales still weak

By Ros Krasny

CHICAGO (Reuters) - U.S. consumers felt much more upbeat about the economy in April, a month when the country's battered manufacturing sector also appeared to be crawling out of a deep recessionary hole, reports showed on Friday.

The news was fresh evidence that the U.S. economy may be on a slow path to recovery, helped by a huge government stimulus package and the Federal Reserve's efforts to prop up the banking sector.

"The U.S. economy appears to be exiting the intensive care unit, but remains in the hospital," said Scott Anderson, senior economist at Wells Fargo Economics in Minneapolis.

April auto sales, however, struck a more somber note. A day after Chrysler LLC filed for bankruptcy, reports showed U.S. automakers were set to post their lowest monthly sales levels in nearly 30 years.

MasterCard Inc also injected a note of caution. The world's second-largest credit card network said on Friday that 2009 revenues will grow less than expected as consumers attempt to trim back debt and use their credit cards less.

But as consumer confidence rises, the willingness of Americans to consider major purchases, or to pull out the plastic, could increase as well.

The Reuters/University of Michigan survey of consumers said its final index of confidence climbed to 65.1 in April from 57.3 in March.

"The improvement in consumer sentiment is encouraging -- consistent with our forecast for a gradual pickup in spending," said Michelle Meyer, an economist at Barclays Capital.

The index reached its highest since September 2008, when the collapse of investment bank Lehman Brothers Holdings, Inc set in motion a crisis that rocked the financial system and pushed the economy, already in recession, into an even deeper downturn.

"Consumers' attitudes about the economy appear to be improving. They remain very cautious, but these data suggest consumers are no longer shell-shocked," said Steven Wood, chief economist at Insight Economics in Danville, California.

Much of the gain in the consumer survey was attributed to a thumbs-up for U.S. President Barack Obama's $787 billion stimulus plan, said Richard Curtin, director of the Reuters/University of Michigan survey.

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

Rising U.S. stock markets in April -- the Standard & Poor's 500 index gained 9.4 percent, its biggest monthly rise in nine years -- were also seen boosting sentiment as well as deep discounts from retailers and in the housing market that have improved buying conditions, Barclays' Meyer said.

The reports helped equities values modestly extended April's gains on Friday. The S&P 500 rose 0.5 percent or 4.7 points to 877.52, its highest closing level since Jan 9.

FOURTH STRAIGHT GAIN IN KEY FACTORY INDEX