Consumer Confidence in U.S. Unexpectedly Declined in May

Consumer confidence unexpectedly fell in May from a nine-month high, showing Americans are being shaken by rising grocery bills and elevated fuel costs.

The Thomson Reuters/University of Michigan preliminary sentiment index decreased to 81.8 from 84.1 in April. The median projection in a Bloomberg survey of economists called for a gain to 84.5.

Food prices have risen and the cost of gasoline has held near its highest level of the year, making buyers less secure in their finances. Falling unemployment, rising home prices and near-record stock indexes could provide support for sentiment, giving Americans the wherewithal to boost the spending that makes up 70 percent of the economy.

“We’re seeing some payback from that big jump that we saw in April,” said Terry Sheehan, an economic analyst at Stone & McCarthy Research in Princeton, New Jersey. “The labor market is improving, the economy is doing better in the second quarter, and confidence should start to build back slowly.’”

Stocks were little changed after the report, with the Standard & Poor’s 500 Index rising less than 0.1 percent to 1872.21 as of 11:21 a.m. in New York.

Another report today showed the pace of home construction jumped in April to its highest level since November, led by a surge in starts on multifamily projects.

Building Permits

Housing starts climbed 13.2 percent to a 1.07 million annualized rate following March’s 947,000 pace, according to Commerce Department figures. Starts exceeded all analysts’ forecasts, with the median estimate of 79 economists surveyed by Bloomberg calling for 980,000. Permits for future projects increased, a sign activity might accelerate in coming months.

Estimates for the confidence index among 66 economists in the Bloomberg survey ranged from 82 to 88. The gauge averaged 89 in the five years before December 2007, when the last recession began and 64.2 in the 18-month contraction that followed.

The Michigan sentiment survey’s index of current conditions, which measures Americans’ views of their personal finances, decreased to 95.1 in May from 98.7 a month earlier.

The gauge of expectations six months from now fell to 73.2 from 74.7 the prior month.

Today’s data are in line with other readings on sentiment. The Bloomberg Consumer Comfort Index fell last week, posting its largest drop since October, as Americans became less upbeat about their personal finances and the overall economy.

Conference Board

The Conference Board’s confidence index decreased April from a six-year high, the New York-based private research group said last month.

An improving labor market may prevent further declines in sentiment. Payrolls climbed by 288,000 workers in April after a 203,000 increase in March that was larger than first estimated, the Labor Department said earlier this month.

Consumer optimism has buoyed auto demand. Cars and light trucks sold at a 16 million annualized rate in April, a slowdown from the fastest rate since 2007 the prior month.

“The economy appears to be on an improving trend for the second quarter and the rest of the year,” Emily Kolinski Morris, senior U.S. economist at Ford Motor Co., said in a May 1 earnings call.

Wage Gains

At the same time, wage gains have been slow to accelerate. Average hourly earnings climbed 1.9 percent in the 12 months through April, the smallest year-over-year advance since December, according to the Labor Department.

What’s more, higher prices at grocery-store checkout lines are leaving households with less to spend elsewhere. Food expenses climbed 0.4 percent in April for a third straight month, the Labor Department’s consumer-price index showed yesterday.

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