U.S. consumer confidence rose in May after it declined for the last three months amid optimism about the labor market, although Americans expect inflation and high interest rates to persist.
The Conference Board’s Consumer Confidence Index rose from 97.5 in April to 102 in May. Economists polled by the Wall Street Journal had projected the index to decline again to 96, and the gauge outperformed the University of Michigan’s consumer sentiment index.
“Confidence improved in May after three consecutive months of decline,” Dana Peterson, chief economist at the Conference Board, said in a statement. He added that the “overall confidence gauge remained within the relatively narrow range it has been hovering in for more than two years.”
“Compared to last month, confidence improved among consumers of all age groups. In terms of income, those making over $100K expressed the largest rise in confidence. On a six-month moving average basis, confidence continued to be the highest among the youngest (under 35) and wealthiest (making over $100K) consumers,” Peterson wrote.
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The report found that consumers cited prices – particularly for food and groceries – as having the greatest impact on their views of the U.S. economy. Their expectations about average inflation over the next 12 months edged up from 5.3% to 5.4%.
Peterson noted that perhaps as a consequence of Americans’ inflation expectations, the share of consumers expecting higher interest rates over the next year also increased from 55.2% to 56.2%.
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Consumers’ assessment of current business conditions edged down slightly in May, with the percentage of respondents who said conditions were “good” declining to 20.3% from 20.8% in April, while the 17.6% of respondents who said conditions were “bad” was unchanged from last month.
There was also an improvement in consumers’ assessment of the labor market, which helped bolster overall confidence.
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“Views of current labor market conditions improved in May, as fewer respondents said jobs were ‘hard to get,’ which outweighed a slight decline in the number who said jobs were ‘plentiful,'” Peterson added. Just 13.5% of consumers said jobs were hard to get, a decline from 15.5%, while those who said jobs were “plentiful” declined to 37% from 38.4% last month.
The report also found that consumers’ short-term outlook for income, business and labor market conditions rose to 74.6 from 68.8 last month.
However, despite that improvement, it remained below 80 for the fourth straight month, which the Conference Board noted is a “threshold which usually signals a recession ahead.”
Reuters contributed to this report.
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