Consumer Confidence Climbs Despite Grocery Costs Pressuring Americans

Consumer confidence crept up in May, as grocery and job worries continue to weigh on Americans.

That’s according to the latest installment of the Conference Board Consumer Confidence Index, which climbed from 97.5 in April to 102 in May, the board said Tuesday (May 28).

The board’s Expectations Index — based on consumers’ short-term outlook for income, business and labor market conditions — rose from 68.8 to 74.6, a figure still below the 80 threshold, which usually signals a coming recession.

“Confidence improved in May after three consecutive months of decline,” said Dana M. Peterson, the Conference Board’s chief economist. “Consumers’ assessment of current business conditions was slightly less positive than last month. However, the strong labor market continued to bolster consumers’ overall assessment of the present situation.”

The report showed views of labor market conditions improving. Fewer respondents said jobs were “hard to get,” outweighing a slight dip in the number who said jobs were “plentiful.”

Fewer consumers said they anticipated a deterioration in future business conditions, job availability and income.

However, write-in responses to the board showed that prices, particularly for food and groceries, are having the greatest impact on consumer’s view of the U.S. economy.

“Notably, average 12-month inflation expectations ticked up from 5.3 percent to 5.4 percent,” the board’s news release said. “Perhaps as a consequence, the share of consumers expecting higher interest rates over the year ahead also rose, from 55.2 percent to 56.2 percent.”

Meanwhile, recent research by PYMNTS Intelligence found that when consumers dip into their savings this year, it will be to pay for items and services they need, and not to treat themselves to nonessential purchases.

“The Pessimism About Pay Rises Offsets the Effect of Falling Inflation” installment of the PYMNTS Intelligence “New Reality Check: The Paycheck-to-Paycheck Report” found that among the 13% of consumers who expect their savings to decrease this year, most expect to spend this money on essential expenses.

The data shows that just 30% of consumers said they would spend their savings on discretionary expenses.

“Consumers across income brackets are being thoughtful about their discretionary spending, with many cutting down on nonessential purchases in response to ongoing inflation,” PYMNTS wrote last week, adding that retailers have noticed this trend.

“Ongoing uncertainty in today’s macroeconomic and geopolitical environment, including prolonged inflation, continue to squeeze our low- to moderate-income customers’ purchasing power,” Ross Stores Executive Vice President and Chief Financial Officer Adam Orvos said during a call with analysts last week.

Also last week, Macy’s Chairman and CEO Tony Spring noted on the company’s latest earnings call that the chain’s customers continue to feel financial pressure, leading them to “carefully scrutinize their discretionary purchases.