Consumer Confidence Index in U.S. Increased to 95.4 in May

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Consumer confidence unexpectedly increased in May from a four-month low as Americans grew more sanguine about the economy and employment opportunities.

The Conference Board’s index of sentiment advanced to 95.4 from a revised April reading of 94.3, the New York-based private research group said Tuesday. The median forecast of 68 economists in the Bloomberg survey called for 95.

Higher home values, near-record stock prices and a stronger job market have helped stabilize confidence even in the face of rising gasoline prices. A sustained pickup in wage growth is probably needed to propel consumer spending after a first-quarter setback.

“When I look at the confidence numbers, I’m seeing more strength than the current consumer spending numbers show,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York. “When you look at the backdrop for spending -- not just confidence but also income and wealth -- they’re all suggesting there should be more spending.”

The report showed a pickup in planned purchases of cars, homes and appliances. The share of Americans that said they intend to buy a new house climbed to 1.4 percent in May, the highest since November.

Home Sales

Figures from the Commerce Department Tuesday showed sales of new properties rose more than projected in April. Purchases increased 6.8 percent to a 517,000 annualized pace.

Estimates for consumer confidence in the Bloomberg survey ranged from 90 to 102.9. The Conference Board’s gauge averaged 96.9 during the last expansion and 53.7 during the recession that ended June 2009.

Other data Tuesday showed orders for capital equipment climbed in April for a second month and home prices rose more than forecast in 20 U.S. cities in March. Bookings for non-military capital goods excluding aircraft, a proxy for future corporate spending on new equipment, advanced 1 percent after a 1.5 percent gain in March that was larger than previously estimated, according to the Commerce Department.

The S&P/Case-Shiller index of property values increased 5 percent from March 2014 for a second month, the group said.

Present Conditions

The Conference Board’s gauge of present conditions increased to 108.1 in May from 105.1 in the prior period. The share of Americans who said business conditions were bad decreased to 17.4 percent from 19.2 percent.

The index of consumer expectations for the next six months fell to 86.9 from 87.1 in April.

“While current conditions in the second quarter appear to be improving, consumers still remain cautious about the short-term outlook,” Lynn Franco, director of economic indicators at the Conference Board, said in a statement.

The Conference Board’s data showed Americans’ assessments of current and future labor-market conditions improved. The share of Americans who said jobs were plentiful increased to 20.7 percent in May from 19 percent.

Employment Outlook

The proportion of consumers expecting more jobs to become available in the next six months climbed to 14.6 percent from 13.8 percent in April.

The share of respondents that said they expected their incomes to grow in the next half year held at 17.4 percent in May.

A consistently stronger economic outlook -- backed by more jobs and faster wage growth -- will be needed to return consumer spirits to their pre-crisis highs. That may in turn help households feel more comfortable boosting their spending, which accounts for about 70 percent of the economy, and taking on more debt.

“Consumer confidence, while it’s not shaky and while I’m not trying to portray the U.S. economy is on shaky ground, it doesn’t feel like the kind of economy that really has folks having a willingness to re-lever and have a lot more confidence than they’ve had recently,” Mark Graf, chief financial officer at Discover Financial Services, said at a May 20 industry conference. “We just need to see a stronger economic backdrop that drives consumer confidence to really get the consumer having in a different fashion.”

First Quarter

Gross domestic product probably declined at a 0.9 percent annualized pace in the first quarter, according to the median forecast of economists surveyed by Bloomberg. Growth in the current quarter is seen recovering to a 2.7 percent pace, according to a survey of economists from May 8 to May 13.

A driver of that rebound is expected to be stronger consumer spending, which cooled in the first quarter after a breakneck pace at the end of last year. Consumers have savings from low gas prices at their disposal, and strong job gains have also provided previously unemployed workers with a paycheck.

Still, that hasn’t been enough to spur confidence higher in recent months. Americans’ expectations for the economy slumped in May by the most since October 2013, data from the Bloomberg Consumer Comfort Index showed last week, casting doubt on consumers’ ability to revive growth.

The University of Michigan’s preliminary sentiment index for May plunged to the lowest since October.

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