(Bloomberg) — Consumer confidence in the U.S. fell to a six-month low in May as Americans became less sanguine about the prospects for the economy.
The University of Michigan said Friday that its final index of sentiment for the month decreased to 90.7 from 95.9 in April. It marked the biggest decline since the end of 2012. The median projection in a Bloomberg survey of economists called for 89.5 after a preliminary May reading of 88.6.
Household concerns that the economy is stumbling and wages will be slow to increase combined to depress spirits at the same time gradually rising gas prices took a bit more of consumers’ incomes. Continued improvement in the labor market that includes greater job security probably needs to be accompanied by pay gains to encourage more spending and propel growth.
“The index is still quite high,” Richard Curtin, director of the Michigan Survey of Consumers, said on a conference call after the figures were released. During the last half of the month, “I expected confidence to inch upward and I still think that is likely over the months ahead.”
Estimates in the Bloomberg survey of 62 economists ranged from 86 to 95.5. The index average 84.1 last year.
The Commerce Department on Friday said gross domestic product declined at a 0.7 percent annualized rate in the first quarter, revised from a previously reported 0.2 percent gain. A swelling trade gap subtracted the most from the economy in 30 years as a stronger dollar caused exports to slump, while imports rose following resolution of a labor dispute at West Coast ports.
Curtin said on the call that he doesn’t think confidence will falter after the figures “because consumers had already anticipated a weaker quarter,” though “it may delay the bounceback in sentiment until late June or maybe early July.”
In the May report, 56 percent thought the economy was improving, down from 63 percent a month earlier and 68 percent at the start of the year.
The current conditions index declined to a seven-month low of 100.8 in May from 107 in April. The measure of expectations six months from now decreased to 84.2, the weakest since November, from 88.8.
Americans expected an inflation rate of 2.8 percent in the next year, up from 2.6 percent in April. Over the next five to 10 years, they expect a 2.8 percent rate of inflation, compared with 2.6 percent in the previous month.