Consumer confidence rebounded in May, according to the University of Michigan and Thomson Reuters. The Consumer Sentiment Survey’s overall index rose from 76.4 in April to 83.7 in May, its highest level since July 2007. It is also a sign that the lull that we have seen in consumer confidence since November has dissipated, at least in this preliminary figure. (A revised number, with more complete information, will be released on May 31.)
The gain in confidence was more than expected, with a consensus estimate of 78.0. Perceptions about the current and future economic environment improved, with the largest gains regarding present conditions. The index for the current situation increased from 89.9 to 97.5; whereas, the forward-looking component moved from 67.8 to 74.8.
Surveys such as this one tend to rise and fall on pocketbook issues, and manufacturers tend to focus in particular on confidence indices to see if they might impact consumer behavior. The recent declines were in large part due to fiscal uncertainties, higher payroll taxes, and persistent economic worries. These issues have not necessarily gone away, but Americans are more than likely reacting to lower energy costs, decent nonfarm payroll gains, and modest growth in the U.S. economy. Earlier in the week, we did learn that retail sales – particularly when you exclude gasoline station spending – rose, a sign that consumers have picked up their purchases of late.
Moreover, the University of Michigan data tend to mirror similar upticks in confidence from the National Federation of Independent Business on small business sentiment and the most recent consumer survey from the Conference Board.
Chad Moutray is chief economist, National Association of Manufacturers.