The American picture of the economy improved in May – for the first time since January – driven by optimism about the labor market.
Despite the better perception of the labor market, concerns about inflation persisted and many households expected higher interest rates in the coming year.
And Tuesday’s Conference Board survey also found that more and more consumers believe the economy could enter a recession in the next 12 months.
Nevertheless, they were very optimistic about the stock market and more people planned to buy major home appliances in the next six months.
US consumer confidence unexpectedly improved in May after falling for three months in a row.
The positive outlook comes after several leading US bankers – including JPMorgan boss Jamie Dimon – issued ominous warnings about the economy.
The US view of the economy improved in May, but they were still concerned about rising prices
The economy is expected to slow this year due to a range of interest rates interest rate hikes by the Federal Reserve since March 2022 – aimed at curbing inflation.
But despite the cooling effect of interest rate hikes on growth, economists and most business leaders are not predicting a downturn.
“Continued positive job growth, rising wages, a buoyant stock market and healthy household balance sheets will keep consumer spending steady despite high prices and borrowing costs,” said Oren Klachkin, financial markets economist at Nationwide.
The Conference Board said its consumer confidence index rose to 102.0 this month, up from an upwardly revised 97.5 in April.
Economists polled by Reuters had forecast the index would fall to 95.9 from the previously reported 97.0. It outperformed the University of Michigan sentiment index.
Confidence remains within the relatively narrow range it has been hovering in for more than two years.
The improvement occurred across all age groups, with consumers with an annual income of more than $100,000 showing the largest increase in confidence.
On a six-month rolling average basis, confidence remained highest among the under 35 age group and among those with an annual income of more than $100,000.
Consumers’ perceptions of the labor market have also improved, with the survey’s so-called labor market gap, derived from data on respondents’ views on whether jobs are plentiful or difficult to get, increasing from 22.9 in April to 24, although the chances are probably not that good. as plentiful as last year.
“The level of this measure remains high by historical standards and signals a continued strong labor market,” said Michael Hanson, an economist at JPMorgan.
The measure is closely linked to the unemployment rate in the employment report of the Ministry of Labor. The resilience of the labor market, mainly characterized by historically low layoffs, is supporting economic expansion.
The latest official figure for inflation shows that it has cooled slightly from 3.5 percent in March to 3.4 percent in April. Americans feel it is higher
Consumers’ annual inflation expectations rose to 5.4% from 5.3% in April. That is much higher than the official figures, which showed that the economy had cooled slightly in April to 3.4 percent from 3.5 percent in March.
“Consumers cited prices, especially food and groceries, as having the biggest impact on their view of the U.S. economy,” said Dana Peterson, chief economist at the Conference Board.
‘Perhaps as a result, the share of consumers who expect higher interest rates in the coming year has also increased, from 55.2% to 56.2%.’
About 48.2% of consumers in the survey expect stock prices to rise in the coming year, while 25.4% expect a decline.
Stocks on Wall Street traded higher, with the tech-heavy Nasdaq index breaking the 17,000 level for the first time. The dollar fell against a basket of currencies. US government bond prices were lower.