Consumer confidence in the United States slid to a three-month low in May amid sticky inflation and a decline in job availability. With both factors likely to persist, we expect confidence to remain on a rocky path over the next couple of months.
The Conference Board’s Consumer Confidence Index inched down to 106.4 in May, following an upwardly revised 108.6 in April, according to data released on Tuesday. The index remained significantly below the pre-pandemic level, which was 130 on average.
Elevated inflation and slower growth put pressure on both current sentiment and future expectations as both categories declined on the month. The present situation index dropped to 149.6 from 152.9, while the expectations index inched down to 77.5 from 79.
Inside the Conference Board’s data, job availability began to show signs of slowing down in May after potentially having peaked in March. The labor differential index—which is calculated as jobs that are plentiful less jobs that are hard to get—dropped to 39.3 in May, the lowest in 12 months, from 44.7 previously.
This was in line with recent data on economic activities slowing down as a result of high inflation and rapid interest rate hikes.
We expect data on job openings for April—a proxy for labor demand—will most likely show a similar decline from March’s peak when it is released on Wednesday.
Spending plans within six months decreased for all categories from homes to automobiles to major appliances in May.
On a three-month moving average, home demand within six months inched up slightly in May, to 6.16 from 6.13 in April, significantly lower than February’s high of 6.57. This was in line with the drops in housing sales in the past three months amid a steep rise in mortgage rates.
One bright spot came from the decline in inflation expectations for the next 12 months, inching down to 7.4% from 7.5% in April, and from 7.9% in March. This mirrored the recent consumer price index data, which showed that inflation most likely peaked in March.
