Consumer confidence rebounds for the first time in 3 months

EleonMay 28, 2024

13 2 minutes read

Consumer confidence rebounds for the first time in 3 months

Consumer confidence rose unexpectedly in May, ending three straight months of declines as Americans rejoiced in a resilient job market.

The Conference Board’s latest index was 102, above 97.5 in April and higher than expected by the 96 economists surveyed by Bloomberg.

“Consumers’ assessment of current economic conditions was slightly less positive than last month,” Conference Board chief economist Dana Peterson said in the release. “However, strong labor market conditions continued to strengthen consumers’ overall assessment of the current situation. Views of current labor market conditions improved in May, as fewer respondents said jobs were ‘hard to find’.”

Peterson added: “Fewer consumers expected future business conditions, job availability and income to deteriorate, leading to an increase in the expectations index. »

Only 13.5% of consumers said a job was “hard to find,” compared to 15.5% in April.

This comes as the economy has continued to show more resilience than expected. Although the unemployment rate increased slightly to 3.9% from 3.8% in April, it has remained below 4% for 27 months, the longest period since the Vietnam War. Meanwhile, the number of Americans filing for unemployment benefits remains low, and various indicators of wage growth show workers are seeing wage increases above the rate of inflation.

Still, high prices remain a major sticking point for consumers and partly explain why confidence hasn’t fully rebounded. Consumers cited prices – particularly those of food and groceries – as having “the greatest impact” on their view of the U.S. economy. The Conference Board’s reading of 12-month inflation expectations rose to 5.4% from 5.3% the previous month. This was also accompanied by a slight increase in the percentage of consumers expecting higher interest rates over the next year.

A new reading of the Fed’s preferred inflation gauge, the Personal Consumption Expenditures Index, is expected Friday morning.

The Conference Board also provided insight into who among the population is feeling better about the economy.

As the stock market hits record highs, the wealthiest Americans are the most optimistic about the state of the economy. Consumers earning more than $100,000 a year expressed “the greatest increase in confidence” among all income cohorts, according to the Conference Board. On a rolling six-month basis, trust is highest among consumers under 35 who earn more than $100,000 a year, according to Peterson.

More than 48% of consumers said they expected stock prices to rise over the next year, the third highest figure in Conference Board history, according to investment strategist Kevin Gordon principal of Charles Schwab.

“We have historically low unemployment and the wealth effects of investing in the market continue to rise, so it shouldn’t be surprising that consumers are feeling good,” said Brian Levitt, global markets strategist at ‘Invesco to Yahoo Finance.