Consumer confidence in the US dropped to a three-month low

US consumer confidence dropped in May to the lowest since February, underscoring the impact of decades-high inflation on Americans’ economic views.

MIDF says the drop in confidence deteriorated as the American consumers anticipated no significant change in the economic momentum in the near term.

In fact, confidence among American consumers weakened in May-22 as the Conference Board confidence index fell to 106.4 (Apr-22: 108.6), the lowest reading in 3 months.

The measures for the present situation and expectation index also declined as consumers expressed less encouraging assessment of the current business and labour market conditions as well as the short-term outlook for income, business and labour market.

Confidence and inflation

“While the business condition is still at a strong level, consumer expectations deteriorated as they anticipated no significant change in the economic momentum in the near term,” says MIDF.

The latest report also highlights that the high inflation and rising interest rates also led to cooling spending plans as consumers shifted from purchasing big-ticket to spending on services.

“We foresee inflation and rising borrowing costs will continue to affect American consumers’ confidence going forward.

“The decline in the consumer confidence, in line with the weaker reading of University of Michigan consumer sentiment, suggests consumption may be constrained by the less encouraging sentiment.

“But, we expect the strong labour market and rising wages to continue supporting consumer spending in the coming months.”

Perceptions

The Conference Board said on Tuesday that its consumer confidence index fell to 106.4 in May from 108.6 in April, still a good result.

The present situation index, which evaluates consumers’ perceptions of current business and labour circumstances, decreased to 149.6 in May from 152.9 in April, according to the business research firm.

In May, the consumer expectations index fell to 77.5 from 79 in April, reflecting consumers’ six-month estimate for income, company, and labour market conditions. It was over 80 in February and is still a stumbling block in the