Consumer Confidence On The Rise – Nears 18 Year High

Confidence in U.S. economic conditions increased in May, recovering from a dip at the beginning of the year.

The Consumer Confidence Index increased to 134.1 in May from 129.2 in April, according to data released on May 28 by The Conference Board, a think tank that creates the index from a survey conducted by Nielsen, a global performance management company.

“Consumer Confidence posted another gain in May and is now back to levels seen last Fall, when the Index was hovering near 18-year highs,” Lynn Franco, senior director of economic indicators at The Conference Board, said in a May 28 release.

The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, increased to 175.2 from 169.0. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, also increased to 106.6 in May from 102.7 in April.

“The increase in the Present Situation Index was driven primarily by employment gains,” Franco said, also adding that “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.”

The job market appears to be the strongest part of the economy. Payrolls expanded by 263,000 jobs in April and the unemployment rate dropped to 3.6 percent, the lowest in almost 50 years.

The benign inflation prompted President Donald Trump’s call for the Federal Reserve to cut interest rates. The central bank recently suspended its three-year interest rate increase campaign and showed little desire in April to alter its monetary policy stance.

“As long as job growth is strong, that is the green light we need to keep consumers moving along,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.

Consumers anticipated inflation would remain muted over the next 12 months. The survey’s one-year inflation expectations fell to 4.4 percent in May from 4.6 percent in April.