US consumer confidence fell to a six-month low in May due to Americans' pessimistic view of the labor market, as reported by the Conference Board. This decrease in confidence was particularly prevalent among consumers over 55 years old and those with annual incomes between $50,000 and $99,000. Despite the ebb in confidence, there was an increased intention to purchase motor vehicles and other expensive items in the next half-year, which could bolster economic growth in this quarter. Inflation expectations also remained steady, though at higher levels than the past year.
The Conference Board's consumer confidence index was reported to be at 102.3 in May, the lowest since the previous November. The focus of the survey was predominantly on the labor market, and it was conducted prior to May 22. The ongoing dispute about increasing the US government's borrowing limit impacted the University of Michigan's consumer sentiment index for May. This political tension, combined with efforts to prevent a US debt default, contributed to a cautious atmosphere in financial markets.
The American public had a less optimistic perspective on job availability, viewing jobs as less abundant and more challenging to secure, causing a decrease in the so-called labor market differential. This drop could indicate a gradual easing in the tight labor market, despite a low jobless rate of 3.4% in April. A variety of economic indicators suggested that the labor market remained tense, but the pace of job growth seemed to be slowing, causing concern for potential vulnerabilities in the job market.
Even in light of lower consumer confidence and potential issues in the labor market, consumers did not appear to be significantly cutting back on spending. The demand for motor vehicles and major appliances like refrigerators, washing machines, and televisions increased, implying that consumer spending could continue to drive economic growth. However, despite a slight rise in the intention to purchase homes, the perennial housing shortage could stifle this demand and further elevate house prices. House prices have been on the rise, and a chronic lack of inventory could exacerbate affordability issues in the housing market.
