NEW YORK — Consumers weren’t exactly a happy bunch in May, but they kept right on spending even amid the specter of rising gasoline prices and tensions in Iraq.
Consumers saw improvement on the jobs front, yet said jobs were “harder to get.” In short, consumers were still confident, but whether they will continue to be is unclear, according to survey data from The Conference Board.
Tuesday, the board’s Consumer Confidence Index for May came in essentially flat from a month ago, and there were indications that conditions could deteriorate. The index inched up 0.2 percent in May to 93.2, compared with 93 in April.
And while the outlook for the short-term — over the next six months — remains positive, an increasing number of respondents are expecting conditions to worsen as the number of consumers who expect their incomes to increase declined again. The survey is based on a representative sample of 5,000 U.S. households.
Of those surveyed, 22.9 percent expect business conditions to improve over the next months, up from 20.8 percent last month. However, also edging up were those expecting conditions to worsen, now at 10.1 percent from 9.3 percent.
On the employment front, consumers expect more jobs to become available in the next six months, rising to 19.2 percent from 18.3 percent. Yet, despite the gain, there is a suggestion that the employment picture is disappointing because 30.6 percent said the jobs are “hard to get,” an increase from 28 percent last month. In addition, the number who anticipate an increase in their incomes fell again to 16.8 percent, down from 17.4 percent in April.
Lynn Franco, director of The Conference Board’s Consumer Research Center, said in a statement, “The pickup in the job market is offsetting the impact of rising gas prices and escalating tensions overseas.”
Even economists were of different viewpoints when it came to whether May’s confidence report was a move forward or a step back.
John Lonski, an economist at Moody’s Investors Service, observed, “The good news is that confidence managed to crawl [up] despite sharply higher energy prices and more troubling news from Iraq. The numbers show an improvement from a year ago. This was not bad at all. I’m surprised that it rose at all.”
Lonski said that so far consumer confidence passed the first test, given the bad news overseas and increases at the gas pump. He noted that so far he hasn’t seen any considerable evidence of retrenchment by the consumer. One factor helping consumers is that the economy is improving, he noted. Another factor is that consumers don’t appear as affected by higher rising gasoline prices as they did back in 1980, when energy costs represented a higher percentage of personal income.
As for where the confidence level will be next month, he said: “It will be interesting to see if consumers finally become more gloomy about economic prospects, [should] energy prices continue to climb.”
According to Stephen Gallagher, economist at SG Cowen, May’s confidence report was okay, if not mildly disappointing. His firm had forecast an increase to 96.
He wrote in a research report, “Consumer confidence failed to respond to better job readings and appears to be held back by the jump in gasoline prices, news on Iraq and lastly, a concern that higher interest rates could hurt the housing market.”
Because the confidence readings are consistent with steady spending, the economist concluded that consumption will likely further encourage production, investment and hiring, given that inventories are low.
Gallagher noted, however, that the mixed readings in May concerning jobs being increasingly plentiful at the same time that they were harder to get possibly signals a slowing improvement. Overall, “the confidence readings are mildly disappointing, but suggest steady consumer spending. A looming question is just how badly rising gasoline prices, increasing interest rates and news from Iraq will harm consumer spending.”