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Economy in Brief

U.S. Consumer Confidence Improves Slightly as Some States Open Up in May
by Tom Moeller  May 26, 2020

• Expectations for business conditions improve moderately.

• Assessment of current activity weakens further.

• Age groups exhibit mixed feelings.

The Conference Board's Index of Consumer Confidence rose 1.1% (-34.0% y/y) this month to 86.6 following a 27.9% decline during April, revised from -26.9%. Despite the recent gain, the index remained near the lowest level of confidence since June 2014. A decline to an index level of 85.0 had been expected in the Action Economics Forecast Survey. Over the last 20 years, there has been a 60% correlation between the level of confidence and the y/y change in real consumer spending.

The index of expected business conditions in six months rose 2.8%, following an 8.6% rise in April. An improved 43.3% of respondents felt that would business conditions would improve, up from the low of 18.7% in March. Thirty-nine percent of respondents felt that there would be more jobs in six months, down slightly from April but up from 16.9% in March. These gains did not, however, translate into improved earnings expectations. A still declining 14.0% of respondents felt that income would improve.

The index of current conditions fell 2.6% to the lowest level since August 2013. A greatly lessened 16.3% of respondents felt that business conditions were good, down from 39.2% in March. Jobs were viewed as hard to get by 28% of respondents, down a bit from April but still higher than 13.8% in March.

Expectations for the inflation rate in twelve months surged to 6.2% and added to April's increase from 4.5% in March. It was the highest level since March 2012, up from 4.5% this past March. Interest rates were expected to move higher in twelve months by 37.4% of respondents, up slightly from April but still nearly half the 2018 high. A greatly lessened 0.7% planned to buy a new home, down from the recent high of 2.0% in March. An improved 4.5% planned to buy a new car within six months while 46.9% planned to buy a major appliance, down from February's high of 55.0%.

By age group, the index of confidence amongst those under age 35 eroded 19.8% (-34.8% y/y) compared to improvement amongst older individuals. For respondents aged 35-54, confidence improved 5.3% (-34.1% y/y). For those over age 55, confidence gained 5.6% (-34.9% y/y).

The Consumer Confidence data are available in Haver's CBDB database. The total indexes appear in USECON, and the market expectations are in AS1REPNA.

Conference Board (SA, % Chg.) May Apr Mar May Y/Y 2019 2018 2017
Consumer Confidence Index 1.1 -27.9 -10.4 -34.0 -1.4 8.0 20.7
   Present Situation -2.6 -56.2 -1.5 -58.3 3.1 13.8 20.3
   Expectations 2.8 8.6 -19.7 -7.7 -6.0 2.6 21.1
Consumer Confidence By Age Group
   Under 35 Years -19.8 -23.9 -6.7 -34.8 0.3 2.7 6.4
   Aged 35-54 Years 5.3 -28.6 -11.0 -34.1 -1.1 7.0 16.4
   Over 55 Years 5.6 -29.2 -10.8 -34.9 -1.9 11.8 33.5
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