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US consumer confidence steady in May, but outlook clouded by Covid-19

By Alexander Bueso

Date: Friday 29 May 2020

US consumer confidence steady in May, but outlook clouded by Covid-19

(Sharecast News) - Consumer confidence in the US steadied in May but uncertainty about the future course of the pandemic continued to cloud the outlook as did expectations for a sharp rise in prices, the results of one of the most closely-followed surveys revealed.
The University of Michigan's consumer confidence index improved from a reading of 71.8 for April to 72.3 in May (consensus: 73.7).

Helping to buoy spirits were government relief checks and unemployment benefits, to the tune of approximately $3.0trn.

Hence, a sub-index linked to the "current situation" rebounded from the previous month's level of 74.3 to 82.3.

But doubt around the pandemic that the key gauge for "expectations" slid from 70.1 to 65.9.

"It should not be surprising that a growing number of consumers expected the economy to improve from its recent standstill, or that the majority still thought conditions in the economy would remain unfavorable in the year ahead," said the survey's director, Richard Curtin.

"This has been a common occurrence in past cycles (see the chart). Expectations for economic growth have always dominated at the ends of recessions, and favourable assessments about the current state of the economy are more frequent near the ends of expansions," he explained.

"More widespread price discounting as well as low interest rates have helped to improve buying plans, but those plans still remain well below the levels recorded three months ago.

"Adding to consumers' concerns about a significant expected drop in income growth, year-ahead inflation expectations rose sharply, putting extra pressure on consumers' abilities to maintain their living standards."

The survey's measures of inflation expectations one year ahead rebounded from 2.1% to 3.2% while that looking five years ahead increased from 2.5% to 2.7%.

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