WASHINGTON: Americans’ feelings about the economy soured in May on worries about the job outlook, but remained relatively strong even with high inflation, according to a survey released Tuesday (May 31).
Amid the fastest rise in US consumer prices in more than four decades, made worse by the war in Ukraine, consumer confidence fell slightly after a modest increase in April, falling to 106.4 versus 108.6, according to the monthly Conference Board survey.
Consumers hungry for savings and government support funds have been a key driver in the recovery of the world’s largest economy, spending freely on major purchases like homes, cars and appliances.
But supply chain grunts, compounded by COVID-19 lockdowns in China, mean demand has outstripped supply, and that dynamic has fueled inflation.
Sentiments about the current situation fell for the second month, falling more than three points to 149.6, as labor market views deteriorated, with a growing share of respondents saying jobs are “difficult to obtain”, according to the report.
Expectations for the next six months fell slightly to 77.5 after gaining the previous month.
Lynn Franco, the institution’s senior director of economic indicators, noted that the readings are still relatively high despite the declines.
“Overall, the current situation index remains at elevated levels, suggesting that growth did not contract further in the second quarter,” Franco said in a statement, referring to the current quarter of the year. April to June.
“That said, with the further weakening of the expectations index, consumers also do not expect the economy to pick up speed in the coming months. They expect labor market conditions to remain relatively solid, which should continue to support confidence in the short term.”
The Federal Reserve launched an aggressive cycle of interest rate hikes to rein in inflation by cooling demand, which Franco said “presents continued downside risks to consumer spending this year.”
The survey also measures consumers’ spending plans over the next six months and shows a slowdown in purchase intentions for high-priced items like houses and cars.
“Holiday plans have also softened due to rising prices. Indeed, inflation remains a major concern for consumers,” Franco said.
Ian Shepherdson of Pantheon Economics noted that households always have a store of cash and “So far they’ve been willing to dip into those savings despite feeling less positive. That’s not called retail therapy for nothing, but we just don’t know how long this will go on.”