U.S. Consumer Confidence Rises for First Time in 4 Months

U.S. consumer confidence unexpectedly rose in May for the first time in four months as views about business conditions and the labor market were less negative.

The Conference Board’s gauge of sentiment increased to 102 in May, from an upwardly revised 97.5 in April, according to data out Tuesday. The reading beat all estimates in a Bloomberg survey of economists. This is the first time the index of feelings about current conditions has climbed since January, and the measure of expectations for the future jumped by the most since July.

Despite the increase, confidence has trended lower in recent months, as inflation has remained mostly stubborn, household debt hit a record, and the job market has softened. And with the Federal Reserve keeping interest rates at a two-decade high, voters are generally downbeat on the economy ahead of November’s election.

That was especially illustrated in Tuesday’s report as consumers’ perceived likelihood of a recession in the next year rose for a second consecutive month.

The views on the labor market, business conditions, and the stock market were rare relative bright spots in a report that otherwise showed consumers are increasingly worried about rising prices and their family’s financial situation.

What Bloomberg Economists Say…

“Rosier views of the stock market helped soothe consumer anxiety in May, especially at higher income levels. However, lower-income households—who bear the brunt of elevated prices, as well as affordability challenges for items like homes and cars—grew more worried.”

—Eliza Winger, economist

Consumers appeared more concerned about inflation, with the average expected rate rising to the highest this year. Data out later this week is expected to show the Fed’s preferred metric of inflation moved mostly sideways last month.

“According to May’s write-in responses, consumers cited prices, especially for food and groceries, as having the greatest impact on their view of the U.S. economy,” Dana Peterson, chief economist at the Conference Board, said in a statement.

Americans’ views of the labor market were mixed. While fewer consumers said jobs were “plentiful,” a smaller share said jobs were “hard to get.” The difference between these two responses—a metric closely followed by economists to gauge labor-market strength—edged higher.

The future outlook for the job market was less pessimistic as near-term income prospects improved.

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