Consumer confidence bounces back after 3-month decline

Consumer confidence unexpectedly rose in May, breaking a three-month streak of declines as Americans celebrated a resilient labor market. The latest index reading from the Conference Board came in at 102, surpassing April’s 97.5 and exceeding the expectations of 96 economists surveyed by Bloomberg.

According to Conference Board chief economist Dana Peterson, consumers’ assessment of current business conditions was slightly less positive than the previous month. However, the strong labor market continued to boost consumers’ overall view of the present situation. In May, fewer respondents reported that jobs were “hard to get,” leading to an improvement in views of current labor market conditions.

Despite a slight uptick in the unemployment rate to 3.9% from 3.8% in April, the economy has shown more resilience than anticipated. The number of Americans filing for unemployment benefits remains low, and wage growth continues to outpace inflation.

However, elevated prices, particularly for food and groceries, continue to impact consumer confidence. The Conference Board reported a 5.4% increase in 12-month inflation expectations, with more consumers anticipating higher interest rates in the coming year.

The wealthiest Americans, those making over $100,000 a year, expressed the most confidence in the economy, with a significant rise in their outlook. Consumers under 35 years old making over $100,000 a year showed the highest confidence levels on a six-month rolling basis.

With the stock market reaching record highs, over 48% of consumers expect stock prices to rise in the next year, marking the third-highest reading in the Conference Board’s history. Analysts attribute this optimism to the low unemployment rate and the positive impact of investing in the market on consumer sentiment.