Consumer confidence edged higher in May, a private research report said Tuesday, but Americans’ expectations for the future fell for the second straight month, indicating the economic recovery is likely to slow in coming months, analysts said.
The New York-based Conference Board said its consumer confidence index rose to 109.8 in May from a revised 108.5 in April. But even though the number of consumers rating the present economy as good increased, their outlook on business conditions and jobs for the next six months soured slightly.
“The bottom line is that consumers still see economic conditions getting better, but the degree of improvement is less than they saw earlier in the year,” said Mark Vitner, senior economist at Wachovia Securities in Charlotte, N.C.
Separately, the Commerce Department reported that consumer spending increased 0.5 percent in April, after a 0.3 percent gain in March, and the National Association of Realtors said sales of existing homes surged 7 percent in April, the third-highest monthly pace on record.
Although the confidence and spending figures were slightly weaker than expected, it was the increased gloom in consumers’ view of the future that caught analysts’ attention.
The Conference Board’s Expectations Index, a gauge of consumers’ six-month outlook, fell for a second straight month, to 109.4 from 109.6 in April. Consumers expecting more jobs to become available in the next six months fell to 13.7 percent from 14.8 percent in April, and only 20.6 percent expected their incomes to increase in the next six months, down from 21.1 percent in April.
“This mediocre showing for the view of the future is somewhat disturbing as it suggests that the consumer may be tiring and that the current rate of consumption is being inflated by low interest rates,” said Drew Matus, financial market economist at Lehman Brothers.
Sales of existing homes increased to a seasonally adjusted annual rate of 5.79 million units last month from an upwardly revised 5.41 million in March. Analysts had forecast a pace of 5.4 million in April.
