Consumer confidence bounced back in May after months of decline

Consumer confidence in the U.S. saw a rebound in May, rising to 102 from 97.5 in April, despite prior months of decline and ongoing concerns over inflation and high interest rates. This increase was unexpected as economists had predicted a further decline. The improvement was supported by a more positive view of the labor market, though the Consumer Confidence Index still hovers in a range suggesting potential recession risks.

Despite the uptick in confidence, concerns remain as consumers expect inflation to continue affecting the economy, with expectations of average inflation over the next 12 months slightly rising to 5.4%. Additionally, more consumers anticipate higher interest rates in the coming year. The labor market's perception improved slightly, although the overall sentiment about business conditions showed a minor decline.

Dana Peterson, the chief economist at the Conference Board, mentioned several factors that influenced the improvement in consumer confidence in May. These factors include:

1. Optimism about the labor market: Consumers' assessment of the labor market improved as fewer people said jobs were "hard to get," which outweighed a slight decline in the number who said jobs were "plentiful." Just 13.5% of consumers said jobs were hard to get, a decline from 15.5%, while those who said jobs were "plentiful" declined to 37% from 38.4% last month.

2. Confidence among all age groups: Compared to the previous month, confidence improved among consumers of all age groups6.

3. Income groups: In terms of income, those making over $100K expressed the largest rise in confidence6. On a six-month moving average basis, confidence continued to be the highest among the youngest (under 35) and wealthiest (making over $100K) consumers.

4. Short-term outlook for income, business, and labor market conditions: The report found that consumers' short-term outlook for income, business, and labor market conditions rose to 74.6 from 68.8 last month.

However, it is important to note that despite the improvement, the overall consumer confidence gauge remained within a relatively narrow range and below the 80-threshold, which usually signals a recession ahead.