Consumer confidence in the United States experienced a slight decline in May, primarily driven by growing worries about the job market, according to the findings of a survey released on Tuesday. The decrease in consumer confidence provides the Federal Reserve with a valuable data point as it considers further interest rate hikes to address the issue of rising prices.
The Conference Board, a prominent research organization, reported that the consumer confidence index dropped to 102.3 in May from a revised figure of 103.7 in April. Although this figure slightly exceeded economists' median forecast in a MarketWatch survey, it still indicates a dampened sentiment among consumers.
Ataman Ozyildirim, the senior economics director at the Conference Board, highlighted the reasons behind the decline, stating, "Consumer confidence declined in May as consumers' view of current conditions became somewhat less upbeat while their expectations remained gloomy." The most significant deterioration was observed in consumers' assessment of current employment conditions, with a sharp decrease in the proportion of individuals reporting that jobs are "plentiful." Additionally, consumers expressed a more pessimistic outlook regarding future business conditions.
Notably, consumers aged 55 and above displayed the most notable decline in confidence, as reported by the Conference Board. Despite their concerns, the US economy added over 250,000 jobs in the previous month, and the unemployment rate reached a historic low not seen since the 1960s.
These shifts in consumer sentiment have implications for the Federal Reserve's decision on interest rates. Futures traders currently assign a greater-than-60% chance that the central bank will vote to raise its benchmark lending rate by a quarter percentage point at its upcoming meeting scheduled for June 13-14, according to data from CME Group.
The US Federal Reserve has been pursuing an aggressive series of interest rate hikes since last year, aiming to manage demand and bring inflation back down to its target of two percent. As the central bank navigates the delicate balance between supporting economic growth and mitigating inflationary pressures, closely monitoring consumer confidence becomes vital in making informed policy decisions.
