Consumer Confidence Posts Solid May Gain

The Conference Board, New York, said its Consumer Confidence Index improved in May for the second consecutive month, back to near 18-year highs.

The Index now stands at 134.1, up from 129.2 in April. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, increased from 169.0 to 175.2. The Expectations Index, based on consumers’ short-term outlook for income, business and labor market conditions, increased from 102.7 last month to 106.6 in May.

“Consumers expect the economy to continue growing at a solid pace in the short-term, and despite weak retail sales in April, these high levels of confidence suggest no significant pullback in consumer spending in the months ahead,” said Lynn Franco, Senior Director of Economic Indicators with The Conference Board.

Tim Quinlan, senior economist with Wells Fargo Securities, Charlotte, N.C., said May’s report was better than expected. “The white-hot labor market continues to underpin measures of confidence,” he said. “Jobs have not been this plentiful since 2001, according to consumers…With jobless claims figures testing lows not seen in 50 years, there is no obvious sign of a turn in prospects for jobs.”

The report said consumers’ assessment of present-day conditions improved further in May. Those stating business conditions are “good” increased from 37.6 percent to 38.3 percent, while those saying business conditions are “bad” decreased from 11.3 percent to 10.2 percent. Consumers’ assessment of the labor market was also more positive. The percentage of consumers stating jobs are “plentiful” increased from 46.5 percent to 47.2 percent, while those claiming jobs are “hard to get” declined from 13.3 percent to 10.9 percent.

Consumers expressed greater optimism about the short-term outlook in May. The percentage of consumers expecting business conditions will be better six months from now increased from 19.4 percent to 21.9 percent, while those expecting business conditions will worsen declined from 9.0 percent to 8.4 percent.

Consumers’ outlook for the labor market was also more favorable. The proportion expecting more jobs in the months ahead increased from 16.7 percent to 19.2 percent, while those anticipating fewer jobs declined from 13.2 percent to 12.5 percent. Regarding their short-term income prospects, the percentage of consumers expecting an improvement increased from 21.5 percent to 22.6 percent, however, the proportion expecting a decrease rose from 6.8 percent to 8.2 percent.