The Conference Board Consumer Confidence Index fell in May to 102.3, down from an upwardly revised 103.7 in April, as general economice confidence dipped even as home purchase intention remained steady month over month.
An index reading above 100 suggests a positive sentiment while that below a negative sentiment as regards the economy.
The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, slid to 148.6 from 151.8 in April. The Expectations Index, based on consumers’ short-term outlook for income, business and labor market conditions, slipped slightly to 71.5 from 71.7 in the month before. The Expectations Index has now remained below 80, a level associated with a recession within the next year, every month since February 2022, with the exception of a brief uptick in December.
In the Conference Board study, 19.6% of consumers said business conditions were good, up from 19% last month; while 17% said business conditions were bad, down from 18.1% in April.
Appraisal of the labor market deteriorated, however, as 43.5% of consumers said jobs were plentiful down from 47.5% month over month and 12.5% of consumers said jobs were hard to get up from 10.6%. As for expectations out to six months further in the year, consumers remained pessimistic, with 12.9% anticipating improving business conditions, down from 14.1%; while 20.6% expect business conditions to worsen, down slightly from 21.4% in April.
Consumers’ assessment of the short-term labor market outlook was a bit more favorable, with 13.6% expecting more job availability, down from 14.3% in April. At the same time, 20.2% anticipate fewer jobs although that figure fell from 21.3% month over month.
Consumers’ short-term income prospect sentiments improved somewhat as 17.8% of study participants said they expect their incomes to increase, up slightly from 17.3% last month; and11.5% said they expect their incomes to decrease, flat with April.
“Consumer confidence declined in May as consumers’ view of current conditions became somewhat less upbeat while their expectations remained gloomy,” said Ataman Ozyildirim, Conference Board senior director, economics. “Their assessment of current employment conditions saw the most significant deterioration, with the proportion of consumers reporting jobs are ‘plentiful’ falling four percentage points from 47.5% in April to 43.5% in May. Consumers also became more downbeat about future business conditions, weighing on the expectations index. However, expectations for jobs and incomes over the next six months held relatively steady. While consumer confidence has fallen across all age and income categories over the past three months, May’s decline reflects a particularly notable worsening in the outlook among consumers over 55 years of age.”
Expectations about inflation, said Ozyildirim, “remain elevated, but stable. Consumers in May expected inflation to average 6.1% over the next 12 months, essentially unchanged from 6.2% in April, though down substantially from the peak of 7.9% reached last year. Nonetheless, consumers continued to view inflation as a major influence on their view of the U.S. economy. Plans to purchase homes in the next six months held steady in May at around 5.6% but were still notably down from 6% to 7% in Q4 2022. Meanwhile, plans to purchase autos and big-ticket appliances ticked up somewhat compared to April.”