Consumer confidence in the United States experienced a notable and unexpected improvement in May, as reported by the Conference Board on Tuesday.
The consumer confidence index climbed to 102.0 in May, an increase from an upwardly revised 97.5 in April, defying economists' predictions. Experts had anticipated a decline, with the index expected to drop to 95.3 from the initially reported 97.0 for April.
This unexpected surge in the overall index was driven by an increase in the present situation index, which rose to 143.1 in May from 140.6 in April.
"Consumers' assessment of current business conditions was slightly less positive than last month," stated Dana M. Peterson, Chief Economist at The Conference Board. "However, the strong labor market continued to bolster consumers' overall assessment of the present situation."
The expectations index also saw a significant rise, reaching 74.6 in May from 68.8 in April. Notably, a reading below 80 generally indicates a looming recession.
"Looking ahead, fewer consumers expected deterioration in future business conditions, job availability, and income, resulting in an increase in the Expectation Index," Peterson added.
She continued, "Nonetheless, the overall confidence gauge remained within the relatively narrow range it has been hovering in for more than two years."
Peterson also highlighted that consumers in May mentioned that prices, especially for food and groceries, significantly influenced their perception of the U.S. economy.
"Notably, average 12-month inflation expectations edged up from 5.3 percent to 5.4 percent," Peterson remarked. "Consequently, the proportion of consumers expecting higher interest rates over the next year also increased, from 55.2 percent to 56.2 percent."
Revised figures from the University of Michigan, released last Friday, showed that consumer sentiment in the U.S. declined slightly less than previously estimated in May.
The consumer sentiment index for May was revised upwards to 69.1 from the preliminary reading of 67.4, an adjustment that economists had not expected.
Despite this upward revision, the consumer sentiment index still experienced a sharp drop from 77.2 in April, plunging to its lowest level since reaching 61.3 last November.
