Consumer Sentiment in US Increases Less Than Forecast in May

Consumer confidence in the United States climbed less than forecast in May as Americans were a little less ebullient about the economy’s prospects in the run up to the presidential election, the University of Michigan’s report showed May 27.

Key points:

• Final index rose to 94.7 (estimate 95.4) from 89 in April
• Down from May preliminary reading of 95.8
• Current conditions index, which takes stock of Americans’ view of their personal finances, climbed to 109.9, the highest since January 2007, from 106.7
• Measure of expectations six months from now advanced to 84.9 from 77.6 in April
• Consumers expect year-ahead inflation rate of 2.4%, lowest since September 2010 and down from 2.8% in April survey
• Consumers see inflation over next five to 10 years at 2.5% rate, same as in April survey and matching the record lows in data going back almost five decades

Household purchasing power is getting a boost as more Americans than at any time in the last 10 years said they expect their finances to improve over the next 12 months. That would help consumer spending, the biggest part of the economy. At the same time, as the election campaign heats up, concerns are mounting about how the U.S. may fare once a new president is in the White House.

“The late-month falloff was due to a slightly less favorable outlook for the overall economy,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement. Households’ biggest uncertainty, said Curtin, was “the outlook for future government economic policies under a new president. This has increased their emphasis on maintaining precautionary savings.”

The survey details:

• Most consumers since 2005 said finances improved
• Biggest share of Americans since 2000 cited income gains
• May survey recorded most positive views of home-selling conditions in a decade
• Americans said improved credit conditions were boosting purchase plans