Consumer confidence declines in May
Consumer confidence levels across the nation fell further in May to a four-month low after declining in April as consumers were less positive about current business and labor market conditions.
The Conference Board’s confidence index declined to 64.9 in May from 68.7 in April.
Calling the decline "surprising," analysts at Barclays Research estimated May levels to rise to 72, while the market expected 69.6.
Lynn Franco, director of economic indicators at The Conference Board noted that consumers were more pessimistic about their short-term economic outlook, but that consumers were more upbeat about their income prospects, which should help sustain spending.
Consumers feel that present-day condition are deteriorating. Those claiming business conditions are "bad" increased to 34.3% from 33.2%, while those saying business conditions are "good" decreased to 13.6% from 15.5%.
Consumers’ appraisal of the job market was also less favorable. Those claiming jobs are "hard to get" increased to 41% from 38.1%, while those stating jobs are "plentiful" decreased to 7.9% from 8.4%.
“Taken together, the retreat in the present situation index and softening in consumer expectations suggest that the pace of economic growth in the months ahead may moderate,” Franco says.
Consumers also grew less upbeat about the short-term outlook. Those expecting business conditions to improve over the next six months decreased to 16.6% from 18%. However, those anticipating business conditions will worsen decreased to 13.1% from 14.2%.
Consumers’ outlook for the labor market worsened. Those expecting more jobs in the months ahead decreased to 15.8% from 16.9%, while those anticipating fewer jobs increased to 21% from 18.4%.
Still, the proportion of consumers expecting an increase in their incomes improved to 15.2% in May from 13.9% in April
Inflation expectations for the next 12 months fell to 5.6% from 5.8%, likely reflecting continued moderation in gasoline prices.
The fall in consumer confidence to a four-month low suggests the sharp fallback in the stock market took a toll on the mood of consumers, more than offsetting any boost to confidence from the continued drop back in gasoline prices.
"We think that improvement in labor markets should push confidence higher in the coming months despite downside risks from domestic fiscal policy and uncertainty abroad, which would mirror a trend already seen in the University of Michigan's survey of consumer sentiment," Barclays analysts say.