WASHINGTON (Reuters) -U.S. consumer confidence unexpectedly improved in May after deteriorating for three straight months amid optimism about the labor market, but worries about inflation persisted and many households expected higher interest rates over the next year.
The survey from the Conference Board on Tuesday also showed more consumers believed that the economy could slip into recession in the next 12 months. Nonetheless, consumers were very upbeat about the stock market and more planned to buy major household appliances over the next six months.
While the economy is expected to slow this year as a result of the cumulative impact of 525 basis points worth of interest rate hikes from the Federal Reserve since March 2022 to tame inflation, economists and most businesses executives are not forecasting a downturn.
“Continued positive job growth, rising wages, an ebullient stock market and healthy household balance sheets will keep consumers spending despite elevated prices and borrowing costs,” said Oren Klachkin, financial market economist at Nationwide.
The Conference Board said that its consumer confidence index increased to 102.0 this month from an upwardly revised 97.5 in April. Economists polled by Reuters had forecast the index slipping to 95.9 from the previously reported 97.0.
Confidence remains within the relatively narrow range it has been hovering in for more than two years.
The improvement was across all age groups, with consumers making annual incomes over $100,000 posting the largest increase in confidence. On a six-month moving average basis, confidence remained highest among the under 35 age cohort and those with annual incomes of more than $100,000.
While US consumer confidence has seen some improvement, inflation concerns persist among economists and policymakers.
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