Consumer Confidence increased in May following a dip in April. The Conference Board's Consumer Confidence Index was 109.8, up 1.3 points from the revised 108.5 in April. This was just under economist's expectations of 110. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.
Confidence was mixed across both portions of the Conference Board index. The Expectations portion of the index, measuring future economic activity, registered 109.4 in May, down slightly from April.
The Present Conditions Index, another factor in the total composite index, increased 3.5 points from 106.8 in April to 110.3 in May. This index is a measure of how consumers perceive the current state of the economy. Spending behavior is generally related to consumer's feelings in the Present Conditions Index.
The University of Michigan's Consumer Sentiment Index, a comparable index, also increased in May to 96.9 from 93 in April. Both component indices also gained. The Expectations Index was 92.7 from 89.1 in April and the Present Conditions portion rose 4.3 points to 103.5.
Boosts in both consumer confidence indices are largely credited to significant gains in consumer's perceptions of present economic conditions. Disparity between the Expectations portions can be attributed to the time horizons used in the surveys. The Conference Board Index surveys households on expectations over the next six months. The University of Michigan Index measures consumer's expectations for the next 12 months and five years. Consumers are more likely to have better expectations for the next year than for the next six months, especially because the economy is expected to slowly expand throughout the rest of the year.
Since consumer spending accounts for two-thirds of the U.S. economy, consumer confidence is a critical component for economic recovery. Economists expect consumer confidence to continue to fluctuate until the economy more fully recovers.
Sources: www.cnnfn.com
www.conference-board.com
www.economy.com
