Consumer confidence rose unexpectedly in May, ending three straight months of decline as Americans cheered a flexible labor market.
the The most recent indicator reading From the Conference Board it was 102, higher than 97.5 in April and higher than the expectations of 96 economists surveyed by Bloomberg.
“Consumers’ assessment of current business conditions was slightly less positive than last month,” Dana Peterson, chief economist at the Conference Board, said in the statement. “However, the strong labor market continued to bolster consumers’ overall assessment of the current situation. Views on current labor market conditions improved in May, with fewer respondents saying it was ‘hard to get jobs.’
“Fewer consumers expected a deterioration in future business conditions, job availability and income, leading to an increase in the Expectations Index,” Peterson added.
Only 13.5% of consumers said jobs are “hard to get,” down from 15.5% in April.
This comes as the economy continues to show greater resilience than many expected. While the unemployment rate rose slightly to 3.9% from 3.8% in April, it has remained below 4% for 27 months. The longest stretch since the Vietnam War. Meanwhile, the number of Americans filing for unemployment benefits remains low, and many wage growth trackers show that workers are seeing wage increases above the rate of inflation.
However, high prices remain a major sticking point for consumers and help explain why confidence has not fully recovered. Consumers indicated that prices – especially food and grocery prices – have the “largest impact” on their view of the US economy. The Conference Board’s reading of 12-month inflation expectations rose to 5.4% from 5.3% the previous month. This also came with a slight increase in the percentage of consumers who expect interest rates to rise over the next year.
A new reading on the Fed’s preferred measure of inflation, the Personal Consumption Expenditures Index, is expected on Friday morning.
The Conference Board also provided insight into who among the population feels better about the economy.
With the stock market at record levels, the wealthiest Americans are the most optimistic about the state of the economy. Consumers earning more than $100,000 annually reported the “largest increase in confidence” among all income groups, according to the Conference Board. On a six-month rolling basis, confidence was highest among consumers under 35 and those earning more than $100,000 annually, per Peterson.
More than 48% of consumers said they expect stock prices to rise in the next year, the third-highest reading in Conference Board history, according to Kevin Gordon, chief investment strategist at Charles Schwab.
“We have a historically low unemployment rate, and the wealth effects of investing in the market continue to rise. So, it shouldn’t be a huge surprise that consumers are feeling good,” Brian Levitt, global markets strategist at Invesco, told Yahoo Finance.
Josh Schaeffer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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