In May 2024, U.S. consumer confidence experienced a rebound after three consecutive months of decline, according to The Conference Board’s Consumer Confidence Index. The index rose to 102.0 (1985=100) from 97.5 in April, surpassing economists’ expectations of a further decline to 96.
Key Highlights:
- Present Situation Index: This index, which measures consumers’ assessment of current business and labor market conditions, increased to 143.1 from 140.6 in April.
- Expectations Index: Reflecting consumers’ short-term outlook for income, business, and labor market conditions, this index rose to 74.6 from 68.8 in April. However, it remained below the 80 threshold, which typically signals an impending recession.
Factors Influencing Consumer Confidence:
- Labor Market: The strong labor market played a significant role in bolstering overall consumer confidence. Fewer respondents reported that jobs were “hard to get,” which outweighed a slight decline in those reporting jobs as “plentiful”.
- Income and Age Groups: Confidence improved across all age groups and income levels, with the most significant increase observed among those earning over $100,000 and individuals under 35 years old.
- Inflation and Prices: Consumers cited high prices, particularly for food and groceries, as having the greatest impact on their economic outlook. Average 12-month inflation expectations edged up from 5.3% to 5.4%.
Short-Term Outlook:
- Business Conditions: Fewer consumers expected business conditions to worsen, with 16.8% anticipating deterioration, down from 19.1% in April. Conversely, 13.3% expected improvement, slightly down from 13.4%.
- Job Availability: The outlook for job availability was less negative, with 12.6% expecting more jobs to be available, up from 12.3% in April, and 18.2% anticipating fewer jobs, down from 19.8%.
- Income Prospects: Consumers’ short-term income prospects improved, with 16.9% expecting their incomes to increase, up from 16.8% in April, and 11.0% expecting a decrease, down from 14.0%.
Concerns and Risks:
- Recession Risk: Despite the improvement in confidence, the perceived likelihood of a U.S. recession over the next 12 months rose for the second consecutive month in May.
- Family Finances: Consumers’ assessment of their family’s current financial situation and their outlook for the next six months deteriorated slightly.
Overall, while consumer confidence showed a modest rebound in May, concerns about inflation, high prices, and potential recession risks persisted.
