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Consumer confidence recovers for the first time in 3 months
Consumer confidence unexpectedly rose in May, ending three consecutive months of declines, as Americans applauded a resilient job market.
O last index read from the Conference Board was 102, up from 97.5 in April and higher than expected by the 96 economists consulted by Bloomberg.
“Consumers’ assessment of current business conditions was slightly less positive than last month,” Conference Board Chief Economist Dana Peterson said in the release. “However, the strong labor market continued to reinforce consumers’ overall assessment of the current situation. Opinions about current labor market conditions improved in May as fewer respondents said jobs were ‘hard to get’ ‘.”
Peterson added: “Fewer consumers expected deterioration in future business conditions, job availability and income, resulting in an increase in the Expectation Index.”
Just 13.5% of consumers said it was “difficult to get jobs,” down from 15.5% in April.
This comes as the economy continued to show more resilience than many expected. While the unemployment rate increased slightly to 3.9%, from 3.8% in April, has been below 4% for 27 months, the longest period since the Vietnam War. Meanwhile, the number of Americans applying for unemployment benefits stays lowIt is multiple salary growth trackers show that workers are seeing wage increases above the rate of inflation.
Still, high prices remain a key sticking point for consumers and help explain why confidence has not fully recovered. Consumers cited prices – particularly food and grocery prices – as having “the biggest impact” on their view of the US economy. The Conference Board’s reading of 12-month inflation expectations rose to 5.4% from 5.3% the previous month. This also came with a slight increase in the percentage of consumers expecting higher interest rates over the next year.
A new reading of the Fed’s preferred inflation gauge, the Personal Consumption Expenditure Index, is expected Friday morning.
The Conference Board also provided information on who in the population feels better about the economy.
With the stock market at record levels, the richest Americans are the most optimistic about the state of the economy. Consumers earning more than $100,000 a year expressed “the greatest increase in confidence” among all income groups, according to the Conference Board. For a period of six consecutive months, confidence has been highest among consumers under 35 who earn more than $100,000 a year, according to Peterson.
More than 48% of consumers said they expect stock prices to rise in the next year, the third-highest reading in Conference Board history, according to Kevin Gordon, senior investment strategist at Charles Schwab.
The story continues
“We have a historically low unemployment rate and the wealth effects of investing in the market continue to increase. So it shouldn’t be a big surprise that consumers are feeling good,” Brian Levitt, global markets strategist at Invesco, told Yahoo Finance.
US fans during the Ryder Cup opening ceremony at Marco Simone Golf and Country Club, Rome, Italy. (Mike Egerton/PA Images via Getty Images) (Mike Egerton – PA Images via Getty Images)
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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