Consumer confidence softened in May as buying perceptions surrounding homes and other durable products, and outlook on the economy, weighed down sentiment. The University of Michigan Surveys of Consumers’ Index of Consumer Sentiment and The Conference Board’s Consumer Confidence Index both registered slides between April and May.

Index of Consumer Sentiment: The University of Michigan Survey of Consumer’s Index of Consumer Sentiment registered at 58.4 in May, down from 65.2 in April and at an 11-year low.

  • The Survey’s Current Economic Conditions index declined from 69.4 in April to 63.3 in May.
  • The Index of Consumer Expectations slipped from 62.5 in April to 55.2 in May.

U-M Analysis:

“The final May reading confirmed the early month decline in consumer sentiment, which fell 10.4% below April and reverted to virtually the same level of sentiment seen in March,” says Surveys of Consumers Director Joanne Hsu. “This recent drop was largely driven by continued negative views on current buying conditions for houses and durables, as well as consumers’ future outlook for the economy, primarily due to concerns over inflation.

“At the same time, consumers expressed less pessimism over future prospects for their personal finances than over future business conditions. Less than one quarter of consumers expected to be worse off financially a year from now.”

Hsu adds, “Looking into the long term, a majority of consumers expected their financial situation to improve over the next five years; this share is essentially unchanged during 2022. A stable outlook for personal finances may currently support consumer spending. Still, persistently negative views of the economy may come to dominate personal factors in influencing consumer behavior in the future.”

Consumer Confidence Index: The Conference Board’s Consumer Confidence Index registered a milder contraction in consumer sentiment than the University of Michigan’s survey, primarily due to the greater emphasis it puts on the labor market. The Index’s May reading of 106.4 down from 108.6 in April.

  • The Conference Board’s Present Situation Index—based on consumers’ assessment of current business and labor market conditions—declined to 149.6 from 152.9 last month.
  • Its Expectations Index—based on consumers’ short-term outlook for income, business and labor market conditions—declined to 77.5 from 79.

Conference Board Analysis:

“Consumer confidence dipped slightly in May, after rising modestly in April,” says Lynn Franco, senior director of economic indicators at The Conference Board. “The decline in the Present Situation Index was driven solely by a perceived softening in labor market conditions. By contrast, views of current business conditions—which tend to move ahead of trends in jobs—improved. Overall, the Present Situation Index remains at strong levels, suggesting growth did not contract further in Q2. That said, with the Expectations Index weakening further, consumers also do not foresee the economy picking up steam in the months ahead. They do expect labor market conditions to remain relatively strong, which should continue to support confidence in the short run.”

“Meanwhile, purchasing intentions for cars, homes, major appliances, and more all cooled—likely a reflection of rising interest rates and consumers pivoting from big-ticket items to spending on services. Vacation plans have also softened due to rising prices. Indeed, inflation remains top of mind for consumers, with their inflation expectations in May virtually unchanged from April’s elevated levels. Looking ahead, expect surging prices and additional interest rate hikes to pose continued downside risks to consumer spending this year.”

Promo Angle: While this is concerning on some levels, consumer sentiment ebbs and flows and can change relatively rapidly—in April, The Conference Board registered a slight increase in consumer confidence, for example, and its Expectations Index registers a growing number of consumers expecting their incomes to increase over the next six months. With marketing budgets on the rise, the appetite for promotional products and the connections they forge with users will likely remain strong among end buyers.