University of Michigan index of consumer sentiment remains stable in May

The University of Michigan index of consumer confidence remained stable at 98.8 in May, as compared with the expectation of a modest fall. The current economic conditions sub-index did moderate to 133.3 from 114.9 previously, consistent with expectation for a drop-off in sentiment, yet the expectations sub-index defied expectations and rose higher to 89.5 from 88.4 last month. Consumer confidence continues to be comparatively high and is expected to be in line with expectation of strong consumption spending in the months ahead, noted Barclays in a research report.

Looking into details, consumers’ perception of household finances and business conditions against a year ago was stable. At a slightly improved rate versus last month, households see their standing today as in line with more income and fewer debts. Around 51 percent of households expect higher income over the next year, down from 55 percent recently.

On the more forward-looking expectations index, business expectations recovered, but continues to be lower than observed earlier this year.

“We view this as likely reflecting increased uncertainty about US trade policy and the imposition of steel and aluminum tariffs on some trading partners”, stated Barclays.

Most consumers expect interest rates to hike and gas prices to increase. Fewer households see the current economy as a good time to purchase a vehicle or a house; more households see now as a good time to sell a home.

“On net, however, consumers remain predisposed toward making large-ticket purchases, though to a lesser degree than at the turn of the year”, added Barclays.

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