Consumer Confidence Declines In May After Three Months Of Gains As Gas Prices Remain Elevated

U.S. consumer confidence declined slightly in May as gas prices remain high and inflation continues to rise.

Concretely, the Conference Board’s consumer confidence index dropped 0.7 points to 93.1. The entity added special questions to the survey, determining that rising prices have caused many Americans to change their spending habits.

Two-thirds of respondents said they have changed their spending habits, particularly by reducing purchases and delaying expensive acquisitions.

The figure follows a Gallup poll showing that Americans’ confidence in the economy is now at a four-year low. Concretely, the pollster’s Economic Confidence Index fell to -45, the lowest reading for the index since October 2022. The index remains above the lowest point of the Biden presidency, -58, which was reached in June 2022 as the economy was still reeling from the Covid-19 pandemic.

The index has been trending downward since the start of the Iran war at the end of February, when the index was at -20. The number fell to -27 in March and -35 in April.

The index’s theoretical top rating is +100 and its worst is -100. Gallup has used the index since 1992. Its highest point ever was in January 2000 at +56, while the lowest point ever reached was during the start of the Great Recession in October 2008: -72.

The polling service found that only 16 percent of the country rate economic conditions as excellent or good. A significant majority, 76 percent, are pessimistic and believe the economy is going to get worse.

Another recent poll showed that more than three-quarters of Americans say their income is not keeping up with inflation.

The CBS News survey found that Americans are stressed about high gas prices and a feeling of uncertainty regarding the war with Iran. The war, launched in February by the U.S. and Israel, has dragged on for months and led to the closure of the Strait of Hormuz, a key waterway through which about a fifth of all global energy passes, leading to soaring prices.

One of the drivers of the economic anxiety to related to the fact that most Americans do not believe their income levels are keeping pace with rising costs. The poll found that only 23 percent said they were keeping up with inflation, with 77 percent saying they were not. Additionally, only 29 percent said the economy was in a good place.

At the same time, another survey showed economists are increasing their inflation forecasts and believe the Fed will take longer to cut interest rates given the current economic scenario.

Concretely, economists surveyed by Bloomberg said they expect inflation to clock in at 3.9% in the second quarter of the year, a 0.3 point increase compared to last month’s poll. They also adjusted their forecasts for the rest of the year.

Elsewhere, respondents said they expect consumer spending and GDP to increase about 2% this year, largely unchanged compared to previous surveys. The chances of a recession over the next 12 months dropped to 25%.