The U.S. consumer confidence index climbed to 102 in May, representing a surge of optimism following three months of consecutive decline, despite persisting worries over inflation and interest rates. This increase in the index is a significant indicator of the ascended spending power of consumers which fuels economic activity. However, persistent inflation and interest rates remain to be a source of concern for a number of consumers.
Public expectation regarding income, business, and job market conditions showed marked improvement in May. But there has also been a surge in those predicting a possible recession, contrasting sharply with the beliefs of CEOs, only a third of whom expect a recession in the future. Interest in large purchases like vehicles and major appliances saw a slight increase, while interest in home buying dropped to its lowest since 2012 due to the impact of high mortgage rates and inflation.
Despite certain signs of a potential economic downturn, the U.S. economy proved resilient with a growth rate of 3.4% in the last quarter.
US consumer optimism persists amid inflation
Though there were impacts on consumers’ credit card reliance due to a sharp decline in first quarter growth and rising interest rates, individual spending habits varied widely, influenced by elements like job security, economic outlook, and personal financial management. Regardless of a slight increase in unemployment, public trust in the labor market increased in May.
Industries across the board have demonstrated significant growth, hinting at a gradual recovery from the pandemic. The construction and IT sectors, in particular, have shown remarkable resilience, while the retail sector is beginning to show signs of positive momentum. Despite a slight increase in unemployment, the average working week and the quality of work have improved, significantly boosting public sentiment towards the labor market.
Experts are stressing the necessity of vigilance in the face of ongoing uncertainties surrounding economic recovery, while also urging for continued support from the government and businesses to maintain the revived momentum in job creation. Despite the minor uptick in unemployment, overall sentiment remains positive in light of the steady recovery of employment.
As consumers become more discreet with their spending due to inflation, retailers are responding with summer sales. Data indicates that while people are not reducing their overall purchases, they are putting more effort into finding the best deals, encouraging competition among retailers to offer the most appealing sales and discounts to maintain their consumer base.
