A key reading of consumer confidence in the economy rose by almost 10% in May - its third consecutive monthly increase.

The Conference Board's widely watched index of consumer economic sentiment rose to 71.6 this month, up from 65.1 in April, the group reported Tuesday. The move far exceeded most economists' expectations, though some still refused to declare a clear-cut victory for the economic recovery.

Since March, the index has climbed from 56.5 to 71.6. The base of 100 was set in 1985.

"The report is encouraging," said Alan Gayle, chief economist at Crestar Financial Corp. in Virginia. "An index at 71.6, however, is not robust. We have not seen a significant increase in consumer activity."

The turnaround is nevertheless a dramatic reversal from steady declines through 1991.

"This consistent improvement in sentiment appears to leave little doubt that the economy is at long last recovering," said Fabian Linden, executive director of the Conference Board's consumer research center, in releasing results of the early May sampling.

Some economic reports released in recent days show that consumer enthusiasm may not directly translate into greater demand for loans. Housing starts declined by 17% in April. And results of a March survey released Tuesday by Visa U.S.A. showed credit card holders lacking confidence in the economy.

Consumers Still Wary

The Visa sampling, conducted by the Gallup Organization, uncovered a distinct lack of trust in the recovery.

Sixty-two percent of 1,000 credit card holders contacted said the economy was worse off than six months earlier, but 23% said conditions were better.

The pessimism was reflected in spending habits. More than half of those contacted said they use their credit cards less frequently than six months earlier. Just under half said they planned to use their cards even less often in the next six months.

Cars and Homes

The Conference Board, too, reported a mixed outlook for consumer purchases. While the number of people planning to buy cars in the next six months rose to 7.4%, from 6.5% in April, the number of those planning to buy homes fell to 3% in May, from 3.5%.

"I'm expecting the recovery to spill over into auto sales by this summer," said James W. Coons, chief economist at Huntington National Bank, Columbus, Ohio. "A recognizable recovery is in fact unfolding."

The Conference Board survey is based on interviews with 5,000 U.S. heads of household.

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