Consumer Confidence Steady In May Despite Softening Expectations

Consumer sentiment in May has been steady, following sharp upturns in April and March. The Conference Board Consumer Confidence Index registered at 117.2 for the month, down marginally from 117.5 in April.

The Conference Board’s Present Situation Index—based on consumers’ assessment of current business and labor market conditions—increased from 131.9 to 144.3 in May. However, its Expectations Index—based on consumers’ short-term outlook for income, business and labor market conditions—fell to 99.1 in May, down from 107.9 last month.

“After rebounding sharply in recent months, U.S. consumer confidence was essentially unchanged in May,” says Lynn Franco, senior director of economic indicators at The Conference Board. “Consumers’ assessment of present-day conditions improved, suggesting economic growth remains robust in Q2. However, consumers’ short-term optimism retreated, prompted by expectations of decelerating growth and softening labor market conditions in the months ahead. Consumers were also less upbeat this month about their income prospects—a reflection, perhaps, of both rising inflation expectations and a waning of further government support until expanded Child Tax Credit payments begin reaching parents in July. Overall, consumers remain optimistic, and confidence should remain resilient in the short term, as vaccination rates climb, COVID-19 cases decline further and the economy fully reopens.”

Consumers’ appraisal of current conditions improved in May. The percentage of consumers claiming business conditions are “good” fell from 19.4 percent to 18.7 percent, but the share saying that they are “bad” also declined, from 24.5 percent to 21.8 percent. Consumers’ assessment of the labor market also improved. The percentage saying jobs are “plentiful” climbed from 36.3 percent to 46.8 percent, while those claiming jobs are “hard to get” declined from 14.7 percent to 12.2 percent.

Consumers’ optimism about the short-term outlook waned in May, however. The Conference Board reports that the percentage of consumers expecting business conditions to improve over the next six months fell from 33.1 percent to 30.3 percent, while the portion anticipating business conditions to worsen rose from 12.1 percent to 14.8 percent. Consumers were also less upbeat about the job market. The share expecting more jobs in the months ahead fell from 31.7 percent to 27.2 percent, while those anticipating fewer jobs rose from 14.4 percent last month to 17.3 percent in May. Regarding short-term income prospects, 14.5 percent of consumers expect their incomes to increase in the next six months, down from 17.4 percent in April. The percentage expecting their incomes to decrease also fell, from 10.5 percent in April to 9.3 percent in May.

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