US consumer confidence edged lower in May as rising gasoline prices and growing concerns over the economic fallout from the conflict involving Iran continued to pressure household sentiment.
Data released Tuesday by the Conference Board showed its consumer confidence index slipped 0.7 point to 93.1 in May, slightly above economists’ expectations of 92 in a Bloomberg survey.
The decline comes as American consumers continue grappling with elevated living costs and growing uncertainty over inflation, even as the broader labor market remains relatively stable.
The latest reading follows a separate University of Michigan survey published earlier this month that showed consumer sentiment falling to the lowest level on record in May.
Views on current conditions deteriorate
Consumers’ assessment of current business and labor market conditions weakened during the month.
The Conference Board’s measure of present conditions declined 3.2 points to 121.2, reflecting softer perceptions of both hiring conditions and broader economic activity.
Meanwhile, the expectations index, which tracks consumers’ short-term outlook for income, business, and labor market conditions, rose modestly by one point to 74.4.
The labor market differential — closely watched by economists as a gauge of labor market strength — also weakened slightly.
The share of consumers saying jobs were “plentiful” minus those saying jobs were “hard to get” fell 0.6 percentage points to 6.9 in May.
Economists said the data suggest households are becoming more cautious even though layoffs remain relatively contained.
Iran war and higher energy prices weigh on sentiment
The Conference Board linked much of the recent weakness in sentiment to rising concerns over inflation fueled by the conflict in the Middle East.
“Consumer confidence edged downward in May as the inflationary impacts of the war in the Middle East intensified,” said Dana Peterson, chief economist at the Conference Board.
Peterson said references to “prices and oil and gas increased in frequency for a second consecutive month,” while mentions of “war, geopolitics, and conflict remained elevated.”
She added that the trend likely reflected consumers’ concerns about how higher energy costs linked to the conflict could affect household finances.
A series of supply disruptions over recent years has already left many American households pessimistic about their financial outlook, despite resilient employment conditions.
The ongoing conflict involving Iran and disruptions around the Strait of Hormuz have pushed up oil prices in recent months, raising concerns about broader inflationary pressures across the economy.
Younger and older consumers turn more cautious
The Conference Board said confidence improved slightly among consumers aged between 35 and 54 years old.
However, sentiment weakened among both younger and older Americans, suggesting broader unease over future economic conditions.
Economists noted that while employed workers continue to benefit from a relatively steady labor market, households searching for jobs have faced a more difficult environment.
The softer confidence figures also arrive ahead of Thursday’s release of the personal consumption expenditures price index, the Federal Reserve’s preferred inflation gauge.
Investors and policymakers are expected to closely monitor the data for signs that rising energy costs are beginning to filter more aggressively through the broader economy.
Consumer mood hits record low in separate survey
Separate data from the University of Michigan underscored the growing pessimism among households.
Its consumer sentiment index dropped to 44.8 in May from April’s final reading of 49.8, marking the lowest level on record.
Joanne Hsu, director of the survey, said the latest reading fell “just below the previous historical trough seen in June 2022.”
The report highlighted worsening inflation expectations as Americans continued facing higher gasoline prices and rising costs tied to the ongoing geopolitical conflict.
Financial markets now expect the Federal Reserve to remain cautious on interest rates as policymakers weigh slowing consumer confidence against persistent inflation risks.
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