Research >> Economics
University of Michigan Consumer Confidence down in May to 90.7
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Consumer optimism retreated in May as consumers adopted more modest prospects for a rebound following the economy’s dismal 1st quarter performance. The decline was widespread among all age and income subgroups as well as across all parts of the country. Despite the May decline, the Sentiment Index has averaged 94.6 during the first five months of 2015. The last year that the Sentiment Index was higher was 2004, when it averaged 95.2. Overall, the latest data are still consistent with a 3% annual growth rate in personal consumption expenditures during 2015.
Spring’s Economic Revival Falls Short
Consumers more frequently reported hearing unfavorable than favorable news about the economy in the May 2015 survey. Consumers judged the pace of growth to have remained sluggish and did not anticipate the same rapid revival in the economy as happened last year. Importantly, half of all consumers still thought the economic outlook was favorable. The main drawback to the slower pace of growth was that consumers anticipated only marginal future reductions in the rate of unemployment.
Personal Finances Still Expected to Improve There was a slight decline in the number of households who reported improved finances in the May survey, largely due to a slower pace of income gains. Nonetheless, consumers remained quite optimistic about their future financial situation as they anticipated income gains twice as large as they did in last May’s survey. Overall, 86% of all households anticipated their financial situation would be the same or improve during the year ahead, while just 12% of all households expected their finances to worsen.
The Consumer Sentiment Index was 90.7 in the May 2015 survey, down from April’s 95.9 but significantly above last May’s 81.9. The Current Conditions Index was 100.8 in May, between the 107.0 in April and last May’s 94.5. The Expectations Index fell to 84.2 in the May 2015 survey from 88.8 in April, but was still substantially above last May’s
73.7.
Price perceptions for a wide range of goods have grown less positive despite low overall inflation. This reflects a downward revision in what consumers judge to be affordable prices due to the lower income growth rates they now expect. While low interest rates continue to boost home and vehicle purchases, smaller retail purchases have not benefitted from low rates. The modest pace of income growth now expected by consumers will increase smaller retail purchases as long as consumers do not anticipate significant increases in interest rates that cause anticipatory buying of homes and vehicles which will act to limit other retail sales gains.”
Posted: May 29, 2015 Friday 10:00 AM