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Consumer Confidence Bouncing Back after Pandemic Low

Things are getting better, at least in consumers’ minds. The May confidence index rose to 86.7 from April’s 85.7, and while the component for current conditions fell 1.9 points, future expectations rose 2.6 points. According to the report, the “free fall stopped in May.”

NEW YORK – The Conference Board Consumer Confidence Index held steady in May, after a sharp decline in April. The Index now stands at 86.6, up from 85.7 in April.

While consumers feel a bit less optimistic about the here-and-now, they have a slightly rosier outlook about the future. The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – declined from 73.0 to 71.1. However, the Expectations Index – based on consumers’ short-term outlook for income, business and labor market conditions – improved from 94.3 in April to 96.9 this month.

“Following two months of rapid decline, the free-fall in Confidence stopped in May,” says Lynn Franco, senior director of economic indicators at The Conference Board. “The severe and widespread impact of COVID-19 has been mostly reflected in the Present Situation Index, which has plummeted nearly 100 points since the onset of the pandemic. However, (future) short-term expectations moderately increased as the gradual re-opening of the economy helped improve consumers’ spirits.”

Franco says consumers still worry about their financial prospects. “In addition, inflation expectations continue to climb, which could lead to a sense of diminished purchasing power and curtail spending. While the decline in confidence appears to have stopped for the moment, the uneven path to recovery and potential second wave are likely to keep a cloud of uncertainty hanging over consumers’ heads.”

Current conditions: The percentage of consumers claiming business conditions are “good” decreased from 19.9% to 16.3%, while those claiming business conditions are “bad” increased from 45.3% to 52.1%.

Consumers’ appraisal of the job market was mixed. The percentage of consumers saying jobs are “plentiful” decreased from 18.8% to 17.4%, however those claiming jobs are “hard to get” decreased from 34.5% to 27.8%.

Future expectations: Consumers were moderately more optimistic about the short-term outlook. Those expecting business conditions to improve over the next six months increased from 39.8% to 43.3%, while those expecting business conditions to worsen decreased from 25.1% to 21.4%.

Consumers’ outlook for the labor market was mixed. The proportion expecting more jobs in the months ahead declined from 41.2% to 39.3%, however those anticipating fewer jobs in the months ahead also decreased, from 21.2% to 20.2%.

Regarding their short-term income prospects, the percentage of consumers expecting an increase declined from 17.2% to 14.0%; however, the proportion expecting a decrease declined from 18.4% to 15.0%.

The monthly Consumer Confidence Survey is based on a probability-design random sample and conducted for The Conference Board by Nielsen. The cutoff date for the preliminary results was May 14.

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