Household views of current US economic conditions slipped in May and a measure of expectations remained below the threshold that historically presaged recession, Tuesday’s update from the Conference Board showed.
That’s the bad news. The (qualified) good news is that the headline index, at 93.1, managed to beat estimates, even as it retreated from an upwardly-revised 93.8 in April.
Dana Peterson, chief economist at the Conference Board, stated the obvious: Consumers are becoming more concerned about the “inflationary impacts” of the war with Iran.
As the figure reminds you, the Conference Board headline never recovered from the pandemic shock.
The results of May’s survey could’ve been worse, all things considered. Just ask University of Michigan sentiment, which printed record lows across the headline and the major subcomponents late last week in the final readouts for May.
Deteriorating household assessments of current business and labor market conditions were “somewhat offset by modest improvements in consumers’ expectations,” Peterson went on, adding that income expectations “eased” this month amid the strain on budgets from quicker inflation.
Notably, more than two-thirds of respondents said they’ve “cut back on spending overall” as a result of higher prices. 61% said they’re buying less stuff, and around half said they’ve delayed a major purchase.
“Worse” (note the scare quotes), almost 47% said they’re shifting spending to things they actually “need” versus things they merely “want.”
The war is well and truly eroding the American dream.
As a member of the upper “K” branch, I am pulling need spending forward. I bought a PC last month instead of next fall, due to memory and component shortages getting worse, booking contractors for deferred maintenance on the house as services inflation shows no signs of abating. So my most expensive ‘needs’ are getting sorted before things might get worse. Here on Long Island, my father used to say when you see a lot of moorings empty in the harbor and the boat yards full of unlaunched boats with for sale signs after Memorial Day, you know people (Upper K) are missing their mortgage payments and regretting their new car payments. I will be paying attention to the marina parking lots over the summer.
I agree with your take on the ‘upper k’. I have been pulling forward some longer term maintenance for the same reasons. It’s beginning to feel like time to ‘batten down the hatches’. Being invested in the market is a pain killer for the ‘upper k’, but look out below if that drug gets taken away.