US consumer confidence fell in early May to a nearly 11-year low on concerns about high inflation. However, household spending remains supported by a strong labor market and huge savings, which could keep the economy expanding.
The University of Michigan survey showed that deteriorating confidence, which some economists say has dipped into a recession zone, affected all demographic groups, as well as geographic and political affiliation.
Gasoline prices and the stock market weigh heavily in the survey.
The University of Michigan’s preliminary consumer confidence index plunged 9.4% to 59.1 points earlier this month, the lowest reading since August 2011. Forecasts had the index at 64 points.
The sharp decline contrasts with the Conference Board consumer confidence survey, whose index remains well above the lows of the Covid-19 pandemic.
“The setback is due both to the perception of current economic conditions and to the outlook for the coming months and is widespread regardless of income, age, education, geographical area or political sympathy”, summarized Joanne Hsu, economist in charge of This survey.
“Consumers’ assessment of their current financial situation relative to a year ago is at its lowest level since 2013,” Hsu said. More than a third of those surveyed attribute these difficulties to inflation.
The fear that the Federal Reserve (Fed) will have to tighten monetary policy has triggered a fall in shares on Wall Street.
“But confidence has been a poor guide to consumption growth in recent years, so we won’t read too much into that signal,” said Michael Pearce, senior US economist at Capital Economics.
The fact that consumers resent paying higher prices and suffering from limited availability does not mean that they do not continue to make those purchases, “he added.
It has been feared that high inflation and interest rate hikes by the Fed, which began in March, could sharply curb growth or even push the economy, which shrank in the first quarter, into recession.
While inflation may remain high, there are increasing signs that price pressures have peaked.
A Labor Department document showed import prices were unexpectedly flat in April, with lower oil costs offsetting higher food prices.