Business News

Consumer Confidence Weakens on High Inflation, Rising Rates

Distressed Patriotic Flag Unisex T-Shirt - Celebrate Comfort and Country $11.29 USD Get it here>>


U.S. consumer confidence fell to a 3-month low in May as soaring prices and rising interest rates fed into a cooling of buying intentions for goods like cars and houses, and as consumers expressed worry about the future pace of inflation.

The Conference Board said in a May 31 statement that its Consumer Confidence Index fell from an upwardly revised 108.6 in April to 106.4 in May.

“Consumer confidence dipped slightly in May, after rising modestly in April,” Lynn Franco, Senior Director of Economic Indicators at The Conference Board, said in a statement.

The Present Situation Index, which is a gauge of how consumers view current business and jobs market conditions, fell from 152.9 last month to 149.6.

That drop was entirely driven by consumers’ perceived deterioration in labor market conditions, while the business component of the metric edged up.

“Views of current business conditions—which tend to move ahead of trends in jobs—improved,” Franco said. “Overall, the Present Situation Index remains at strong levels, suggesting growth did not contract further in Q2.”

The U.S. economy contracted by an annualized 1.5 percent in the first quarter of 2022, according to the Bureau of Economic Analysis. The government agency said in a statement that an increase in COVID-19 cases in the first quarter led to continued restrictions and business disruptions in parts of the country, with an impact on the economic output.

The Conference Board sentiment survey also showed a deterioration in consumers’ confidence in the economy. The Expectations Index, which is a forward-looking measure, dropped from 79.0 last month to 77.5 in May, suggesting consumers don’t expect the economy to pick up steam in the months ahead.

Soaring inflation, which has been running at a 40-year high, led to a decline in spending plans on more expensive goods and services, according to Franco.

“Purchasing intentions for cars, homes, major appliances, and more all cooled—likely a reflection of rising interest rates and consumers pivoting from big-ticket items to spending on services,” Franco said, with high prices also having a cooling impact on vacation spending plans.

“Indeed, inflation remains top of mind for consumers, with their inflation expectations in May virtually unchanged from April’s elevated levels,” Franco added.

Expectations for inflation to remain elevated dovetail with a recent study from the New York Federal Reserve, which found that American consumers expect no relief from high prices in the near-term, believing inflation will stay high for the next 12 months before finally losing steam over a 3-year horizon.

“Looking ahead, expect surging prices and additional interest rate hikes to pose continued downside risks to consumer spending this year,” Franco said.

Consumer spending is a key driver of the U.S. economy, accounting for around two-thirds of gross domestic product (GDP).

The Conference Board survey also showed that consumers were somewhat less pessimistic about the short-term labor market outlook and mixed about their short-term financial prospects.

Tom Ozimek

Follow

Tom Ozimek has a broad background in journalism, deposit insurance, marketing and communications, and adult education. The best writing advice he’s ever heard is from Roy Peter Clark: ‘Hit your target’ and ‘leave the best for last.’



Source link

TruthUSA

I'm TruthUSA, the author behind TruthUSA News Hub located at https://truthusa.us/. With our One Story at a Time," my aim is to provide you with unbiased and comprehensive news coverage. I dive deep into the latest happenings in the US and global events, and bring you objective stories sourced from reputable sources. My goal is to keep you informed and enlightened, ensuring you have access to the truth. Stay tuned to TruthUSA News Hub to discover the reality behind the headlines and gain a well-rounded perspective on the world.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.