#United States #New York #Consumer Confidence #Economic Outlook #Trade Deals

US Consumer Confidence Bounces Back in May

In a promising turn of events, the Conference Board has reported a significant increase in the Consumer Confidence Index for May, rising 12.3 points to a total of 98.0, up from 85.7 in April. This marks a much-needed relief for consumers after five consecutive months of decline in confidence. The data, which reflects sentiment around both current and future economic conditions, presents a mixed but hopeful outlook for consumers across the United States.

Current Economic Situation

The Present Situation Index, measuring consumers' perceptions of business and labor market conditions, also saw an uptick of 4.8 points, reaching a reading of 135.9. Meanwhile, the Expectations Index, which gauges short-term outlooks regarding income, business conditions, and jobs, surged by 17.4 points to a total of 72.8. Despite this improvement, it's important to note that this figure remains below the critical threshold of 80, traditionally indicative of upcoming recessionary periods.

The upturn in consumer confidence started to take shape before the announcement of a temporary pause on certain tariffs on Chinese imports. Economist Stephanie Guichard explains, "The rebound was clear even prior to the trade announcement, gaining momentum following it. The rise was notably underpinned by improved expectations concerning business conditions, employment opportunities, and future income."

Broad-Based Optimism

This month’s survey revealed that consumers from all age groups and income strata displayed heightened confidence, with the most significant shifts seen among Republican respondents. Nonetheless, assessing the moving averages over six months shows that consumer confidence remains lower due to previous months' declines. While their sentiment regarding current business conditions improved, perceptions about job availability took a downturn for the fifth consecutive month.

Equity markets witnessed a recovery in May, bolstering consumers’ outlook on stock prices. The percentage of respondents anticipating an uptick in stock prices over the next year rose to 44% from April's 37.6%, while those predicting a decline decreased to 37.7% from 47.2% the previous month. This indicates growing optimism about the stock market’s trajectory post-trade agreement announcements.

Tariffs and Inflation Concerns

Interestingly, consumer commentary indicated that concerns regarding tariffs remain prevalent, with many still worried about potential price hikes and negative economic impacts. Despite ongoing concerns about inflation and elevated prices, there were also mentions of easing inflation rates and declining gas prices, which could alleviate some financial strain for consumers.

Consumers expressed improvements in perceptions regarding their families' current and future financial situations. The share of individuals fearing a recession in the coming 12 months declined, demonstrating a shift in sentiment. Also, inflation expectations saw a slight decrease to 6.5%, down from April’s spike of 7%.

Increasing Purchase Intentions

In May, the survey highlighted a notable rise in purchasing intentions for significant items such as homes and vehicles. Many respondents expressed plans to make significant purchases of big-ticket items, with a special emphasis on appliances and electronics. There was also a marked increase in intentions to spend on services, especially dining out and streaming services.

However, the survey also pointed out that consumer behaviors related to savings and spending exhibited variability across income levels. More than a third (36.7%) indicated they are saving for future purchases, while 26.6% reported tapping into savings to meet current expenses. Conversely, 26% put off major purchases. A clear distinction was observed between wealth brackets, with higher-income households more inclined to save, while lower-income families leaned more towards depleting their savings.

Rising Anxiety Over Affordability

When asked about worries regarding employment and affordability, consumers displayed a higher level of anxiety about being unable to purchase necessary items than concerns about potential job loss. Nearly half expressed worries about affording essential goods, while less than a quarter reported fears about job security.

Conclusion

In summary, May's consumer confidence survey suggests a cautious recovery in consumer attitudes bolstered by recent trade negotiations and a recovering stock market. As the economy navigates these challenging waters, signs of optimism are cautiously emerging, accompanied by ongoing concerns about affordability and economic stability.