Despite Surprise Boost in Consumer Confidence, Recession Fears Rose in May

Beautiful woman with money jar. Bankruptcy concept.
Getty Images/ D-Keine

U.S. consumer confidence unexpectedly improved in May, breaking a three-month slump as consumers felt better about the job market and more optimistic about jobs, business conditions, and incomes in the months ahead.

At the same time, consumers felt worse about their household finances, expect more inflation and higher interest rates, and worries about a recession increased.

The Conference Board’s confidence index surged to 102, up from an upwardly revised 97.5 in April, according to Tuesday’s data. Economists had forecast a decline to 95.3.

May’s index of present conditions rose for the first time since January, while the measure of expectations saw its biggest jump since July.

The May reading on consumer confidence is at odds with the University of Michigan’s survey of consumer sentiment, which registered a decline this month.

Despite the improvement, the expectations portion of the index was in the range suggesting a looming recession for the fourth consecutive month.

“The survey also revealed a possible resurgence in recession concerns. The Perceived Likelihood of a US Recession over the Next 12 Months rose again in May, with more consumers believing recession is ‘somewhat likely’ or ‘very likely,'” said Dana Peterson, chief economist at The Conference Board.

For the second straight month, buying plans for autos rose slightly but remained at “relatively depressed” levels, according to the Conference Board. Buying plans for most big-ticket appliances increased for the first time in several months. There was renewed interest in buying smartphones—although plans for other electronic purchases remained unchanged.

On a six-month moving average basis, purchasing plans for homes were unchanged in May. These are at their lowest level since August 2012. In a separate report, the Case-Shiller home price indexes showed on Tuesday that home prices rose to a record high in March.

Inflation remains a persistent problem, with consumers seeing it getting even worse and forcing interest rates to stay high or even climb higher. Average 12-month inflation expectations rose from 5.3 percent to 5.4 percent. The share of consumers expecting higher interest rates rose from 55.2 percent to 56.2 percent. Consumers’ assessment of their family’s financial situation both now and over the next six months worsened slightly.




Please let us know if you're having issues with commenting.