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US consumer confidence index steady in May at 86.6: survey

[WASHINGTON] US consumer confidence stabilised in May at 86.6, after two months of sharp declines as the coronavirus pandemic slammed the world's largest economy, according to a survey released Tuesday.

While The Conference Board's confidence index was rose slightly above the reading in April, which was revised down to 85.7, the May result was just below analysts' expectations.

"Following two months of rapid decline, the free-fall in confidence stopped in May," said Lynn Franco, senior director of economic indicators at The Conference Board.

But Ms Franco cautioned that "the uneven path to recovery and potential second wave are likely to keep a cloud of uncertainty hanging over consumers' heads."

Consumers were gloomy about the current climate but were optimistic about the future: the survey's Present Situation Index fell to 71.1 from 73.0 in the prior month, while the Expectations Index improved to 96.9 from 94.3.

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More than half of consumers described business conditions as "bad" in May, the survey found, with just 16.3 percent describing them as "good," a decrease from April.

However, 43.3 per cent of consumers expected conditions to improve over the next six months, while only 21.4 per cent expected them to worsen, a smaller share than the last survey.

The positive six-month outlook showed "people are probably looking down the road, they realize this is temporary and they believe they are going to go back to work and businesses will reopen," White House economic advisory Larry Kudlow told reporters.

He repeated President Donald Trump's upbeat outlook, predicting "a tremendous rebound" of the economy in the second half of the year.

Perceptions of the job market were less straightforward. The share of consumers describing jobs as "plentiful" or "hard to get" each declined from April, to 17.4 per cent and 27.8 per cent, respectively.

Similar dissonance was seen in expectations for job availability, where the percentages of consumers expecting both more and fewer jobs declined in May.

In an analysis, Oxford Economics said consumers' dim expectations for their income "may restrain consumer spending and the overall recovery."

Only 14 per cent of those surveyed expected their incomes to increase in May and while the proportion expecting earnings to fall declined to 15.0 per cent from 18.4 per cent in April, it was still at a fairly elevated level.

Washington has responded to the coronavirus downturn by rolling out new stimulus measures including loans to small businesses and direct cash payments, and the New York Federal Reserve Bank said Tuesday its own survey showed consumers are expecting more help from the government.

Consumer expectations for student debt forgiveness, federal welfare benefits and affordable housing hit new highs in April, with more than half of Americans expecting expanded unemployment benefits in the year ahead, bank economists said in a blog post Tuesday.

Consumers also increasingly expect of changes to federal taxes, including a decrease in the petrol or payroll tax, or an increase in the income tax rate for the richest, the economists said.

AFP

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