Current Conditions Worsen, Consumer Expectations Rise
US consumer confidence fell slightly in May, reflecting a weakening assessment of current economic conditions amid rising prices linked to the Iran war. The Conference Board's consumer confidence index, released on Tuesday (May 26), fell 0.7 points to 93.1, after the previous month's reading was revised upward. This figure was still slightly above the median economist forecast of 92 in a Bloomberg survey.
The decline stemmed primarily from the current conditions component. The present conditions index fell 3.2 points to 121.2, while the six-month expectations index rose to 74.4. This pattern suggests consumers perceive cost-of-living pressures as being felt "now," although some still see short-term prospects as not worsening uniformly.
This report adds to indications of growing anxiety about the cost of living, with soaring fuel prices cited as a major burden, especially for lower-income households. These pressures occur despite the labor market being considered relatively stable and no signs of widespread layoffs.
The macro transmission is clear: rising energy prices drive inflationary pressures that erode purchasing power, depress consumer perceptions, and risk limiting the scope for monetary policy easing. If inflation remains high, expectations of tighter interest rates for longer tend to strengthen, which could slow demand momentum through credit costs and cautious spending.
In terms of activity, consumer spending is said to remain resilient, partly helped by tax refunds. However, economists estimate demand growth will moderate through 2027, in line with pressures on the cost of living and potentially persistent tightening of financial conditions.
Going forward, the market will monitor whether energy price pressures subside or persist, the movement of the "present conditions" component in the next release, and the consistency of household spending with signals of moderate demand growth. (Arl)*
Source: Newsmaker.id
