- The consumer confidence index fell to 106.4 in May
- The labor market indicator softens; more say hard-to-find jobs
- Purchasing intentions for cars, homes, large appliances provided
- House prices accelerate year-on-year in March
WASHINGTON, May 31 (Reuters) – US consumer confidence fell moderately in May as persistent, high inflation and rising interest rates forced Americans to be more cautious about When it comes to buying large quantities of items, including motor vehicles and homes, that could slow down economic growth.
This Tuesday’s Conference Board survey also showed that consumer perceptions of the job market have softened somewhat this month. Although the drop in confidence was small, he suggested that the Federal Reserve’s aggressive monetary policy actions to curb demand were beginning to have an impact.
“We can never underestimate the American consumer,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto. “But plans to withdraw purchases and be a little more cautious are something the Federal Reserve would appreciate because it aims to cool demand.”
Register now for FREE and unlimited access to Reuters.com
Sign up
The Conference Board’s consumer confidence index fell to a reading of 106.4 this month. April data was revised above to show the index at 108.6 instead of the previously reported reading of 107.3. The index remains above its pandemic lows.
It has fared better than the University of Michigan survey, where the consumer sentiment index is at least 11 years old. The Conference Board survey puts more emphasis on the job market.
The so-called labor market differential of the survey, derived from data on respondents’ opinions on whether jobs are plentiful or difficult to get, fell to 39.3 this month from a reading of 44 , April 7th. It was the first time in a year that this measure, which correlates with the Department of Labor’s unemployment rate, was below 40.
About 12.5% of consumers considered jobs “difficult to get”, an increase of 10.1% in April. At face value, it suggests that the unemployed probably rose from a two-year low of 3.6% in April.
Despite somewhat unfavorable consumer perceptions, the labor market is tightening, and the Conference Board notes that “labor market conditions are expected to remain relatively strong, which should continue to support short-term confidence. time limit”.
There was a record 11.5 million jobs opened on the last day of March and a record high of 4.5 million workers resigned.
Wall Street shares fell. The dollar remained stable against a basket of currencies. U.S. Treasury prices fell.
Consumer confidenceAn employee hangs children’s clothing at a Target store in King of Prussia, Pennsylvania, USA, November 20, 2020. REUTERS / Mark Makela / File Photo
INFLATION RISED THE PEAK
Consumer inflation expectations for the next 12 months fell to 7.4% from 7.5% in April. This is in line with economists’ views that inflation has probably peaked.
The Fed has raised its political interest rate by 75 basis points since March. The U.S. central bank is expected to raise the rate to a half-day percentage point at each of its upcoming meetings in June and July.
With prices still high and borrowing costs rising, consumers are re-evaluating their spending plans. The proportion of consumers planning to buy a motor vehicle over the next six months fell. Fewer consumers intended to buy large appliances such as refrigerators, washing machines, dryers and televisions.
But purchasing plans remained at sufficient levels to keep consumer spending growing and the economy as a whole expanding. Rising interest rates and the tightening of accompanying financial conditions have left Americans worried about an impending recession. Economists say the crackdown on an economic downturn has been exaggerated, noting the record high for job offers and layoffs.
“Recessions are ultimately a loss of faith,” said Bernard Yaros, an economist at Moody’s Analytics in West Chester, Pennsylvania. “However, consumers are not afraid to ensure job security. People leave their jobs at a prodigious rate, knowing that they will easily find another job given the record number of open jobs.”
Consumers this month also showed less inclination to buy a home, as rising mortgage rates and record house prices eroded affordability.
A separate report on Tuesday showed that the S&P CoreLogic Case-Shiller 20 metropolitan area housing price index rose a record 21.2% year-on-year in March after rising 20.3% in February. A tight inventory, especially of previously owned homes, is driving up house prices. There were large price gains in several cities, including Tampa, Phoenix and Miami.
Strong house price inflation was bolstered by another report from the Federal Housing Finance Agency showing that house prices rose 19% in the 12 months to March to increase by 19.3% in February. Price gains were widespread, with notable increases in the South Atlantic, Southeast Central, Southwest Central, Mountain, and Pacific regions.
Shiller case
With the slowdown in demand, house price inflation will cool. This month’s reports showed a continued drop in sales of new homes and property prior to April. Loan applications for home purchase have also been declining.
“Housing price gains will be much more modest from here,” said Matthew Pointon, a senior economist at Capital Economics in New York. “We expect annual growth to decline to zero by mid-2023.”
Register now for FREE and unlimited access to Reuters.com
Sign up
Report by Lucia Mutikani; Edited by Andrea Ricci
Our standards: Thomson Reuters’ principles of trust.