Confidence slips in May; consumers ‘gloomy’

Increased worries about the labor market put a dent in consumer confidence in May. 

U.S. consumer confidence fell to 102.3% in May, the lowest level since last November, according to The Conference Board.  The Index now stands at 102.3, down from an upwardly revised 103.7 in April.

 The Present Situation Index — based on consumers’ assessment of current business and labor market conditions — decreased to 148.6   from 151.8 last month.  

Consumers also became more downbeat about future business conditions.  The Expectations Index has now remained below 80 (the level associated with a recession within the next year), every month since February 2022, with the exception of a brief uptick in December 2022.

“Consumer confidence declined in May as consumers’ view of current conditions became somewhat less upbeat while their expectations remained gloomy,” said Ataman Ozyildirim, senior director, economics at The Conference Board.  “Their assessment of current employment conditions saw the most significant deterioration, with the proportion of consumers reporting jobs are ‘plentiful’ falling 4 ppts from 47.5 percent in April to 43.5 percent in May.”

 Although consumers also became more downbeat about future business conditions, which weighed on the expectations index, 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,” said  Ozyildirim.

Consumers’ inflation expectations 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 percent reached last year. 

  “Nonetheless, consumers continued to view inflation as a major influence on their view of the U.S. economy,” added  Ozyildirim.

Plans to purchase homes in the next six months held steady in May at around 5.6%, but was still notably down from 6% to 7% in the fourth quarter of 2022. Meanwhile, plans to purchase autos and big-ticket appliances ticked up somewhat compared to April.

Highlights from the May report are below.

Present Situation

Consumers’ assessment of current business conditions improved marginally in May:

• 19.6% of consumers said business conditions were “good,” up from 19.0% last month; and 
• 17.0% said business conditions were “bad,” down from 18.1%.

Consumers’ appraisal of the labor market deteriorated:

• 43.5% of consumers said jobs were “plentiful,” down from 47.5%; and
• 12.5% of consumers said jobs were “hard to get,” up from 10.6% last month.

Expectations Six Months Hence

Consumers remained pessimistic about the short-term business conditions outlook in May:

• 12.9% of consumers expect business conditions to improve, down from 14.1%; and 
• 20.6% expect business conditions to worsen, down slightly from 21.4%. 

Consumers’ assessment about the short-term labor market outlook was slightly more favorable:

• 13.6% of consumers expect more jobs to be available, down from 14.3%;  and 

 20.2% anticipate fewer jobs, down from 21.3%.

Consumers’ short-term income prospects was, on balance, slightly more favorable:

• 17.8% of consumers expect their incomes to increase, up slightly from 17.3% last month; and
• 11.5% expect their incomes will decrease, same as last month.

The monthly Consumer Confidence Survey, based on an online sample, is conducted for The Conference Board by Toluna, a technology company that delivers real-time consumer insights and market research through its innovative technology, expertise, and panel of over 36 million consumers. The cutoff date for the preliminary results was May 22.