Consumer Confidence Dips in May

Consumer confidence fell for the second straight month, said The Conference Board, New York, but overall sentiment remained steady.

The Consumer Confidence Index, which had decreased in April, declined slightly in May. The Index now stands at 117.9, down from 119.4 in April. The Present Situation Index increased marginally from 140.3 to 140.7, while the Expectations Index declined from 105.4 last month to 102.6 in May.

“Looking ahead, consumers were somewhat less upbeat than in April, but overall remain optimistic that the economy will continue expanding into the summer months,” said Lynn Franco, Director of Economic Indicators at The Conference Board.

The report said consumers’ appraisal of current conditions held steady in May. Those saying business conditions are “good” edged down from 30.8 percent to 29.4 percent, but those saying business conditions are “bad” was unchanged at 13.7 percent. Consumers’ assessment of the labor market also remained positive. Those stating jobs are “plentiful” declined marginally from 30.3 percent to 29.9 percent, however, those claiming jobs are “hard to get” decreased from 19.4 percent to 18.2 percent.

Consumers were less optimistic about the short-term outlook in May. The percentage of consumers expecting business conditions to improve over the next six months decreased from 25.1 percent to 21.3 percent, however, those expecting business conditions to worsen declined marginally from 10.4 percent to 10.1 percent.

Consumers’ outlook for the labor market was mixed. The proportion expecting more jobs in the months ahead declined from 21.9 percent to 18.6 percent, but those anticipating fewer jobs decreased from 13.8 percent to 12.0 percent. The percentage of consumers expecting their incomes to increase edged up from 18.7 percent to 19.2 percent, but the proportion expecting a decrease also rose, from 7.6 percent to 8.7 percent.

“The overall index remains above the average for the six full months of data since the election, which had raised hopes that some growth-oriented fiscal stimulus would be enacted this year,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “That still may happen, but consumers have clearly scaled back their expectations. After hitting a post-recession high of 112.3 in March, the expectations series has fallen 9.7 points over the past two months.”

Vitner noted the decline in expectations does not signal any increase in anxiety about the economy. “Employment prospects are likely the most important driver of consumer confidence today,” he said. “The employment components of the Conference Board survey are often looked to for any possible clues for the upcoming employment report. This May data were up on balance, but not decisively. Buying plans for automobiles, homes and major appliances all declined. While these data are notoriously volatile, all three series hit their lowest levels this year. This bears watching but runs counter to recent reports citing improving consumer finances.”