Consumer Confidence weakens in May as Middle East price pressures persist

NEW YORK – As the conflict in the Middle East continues, consumers are showing hesitancy when it comes to their overall confidence. According to the latest report from the Conference Board, the Consumer Confidence Index dipped 0.7 points to 93.1 for the month of May.

The Present Situation Index also dropped as consumers’ assessment of current business and labor conditions lessened. The index now sits at 121.2, down 3.2 points from April. Consumers’ short-term outlook for conditions was slightly better, rising 1 point to 74.4 – an encouraging sign, but still below the 80-mark indicative of a recession.

“Consumer confidence edged downward in May as the inflationary impacts of the war in the Middle East intensified,” said Dana M. Peterson, chief economist at the Conference Board. “Consumer appraisals of current business conditions and the current labor market were moderately less positive compared to last month. This was somewhat offset by modest improvements in consumers’ expectations for business conditions and the labor market six months from now.”

A deeper look at the Present Situation Index shows that consumers’ net view of current business conditions is deteriorating. The share of consumers saying conditions are “good” vs. “bad” fell by 2.8 percentage points to +1.4 percent. Perception of employment conditions also declined and the labor market differential – the share of consumers saying jobs are “plentiful” vs. “hard to get” – edged down 0.6 percentage points to +6.9 percent.

The Expectations Index saw two of its three components — net expectations for business and labor market conditions six months from now — inch up, while expected household income was slightly less positive.

In the write-in responses on factors affecting the economy, there was an increase in consumers referencing oil and gas prices. Mentions of war and geopolitics also increased, signaling consumers’ concerns about the impacts of the war in the Middle East.

Other findings from this month’s report include:

Present Situation

Consumers’ views of current business conditions eroded in May.

• 18.5 percent of consumers said business conditions were “good,” down from 22.3 percent in April.
• However, 17.1 percent said business conditions were “bad,” down from 18.1 percent.

On net, consumers’ views of the labor market worsened slightly in May.

• 25.5 percent of consumers said jobs were “plentiful,” down from 26.9 percent in April.
• Conversely, 18.6 percent of consumers said jobs were “hard to get,” down from 19.4 percent.

Expectations Six Months Hence

Overall, consumers were moderately more optimistic about future business conditions in May.

• 19.0 percent of consumers expected business conditions to improve, down from 19.4 percent in April.
• Conversely, 22.5 percent expected business conditions to worsen, down from 23.8 percent.

Consumers were also more positive about the labor market outlook in May.

• 17.5 percent of consumers expected more jobs to be available, up from 16.7 percent in April.
• 26.0 percent anticipated fewer jobs, down from 26.8 percent.

On net, consumers’ outlook for their income prospects was slightly more pessimistic in May.

• 20.0 percent of consumers expected their incomes to increase, up from 19.4 percent in April.
• However, 13.7 percent expected their incomes to decline, up from 12.4 percent.