Consumer Sentiment Drops in May on Labor, Inflation Worries
16 hr 53 min ago
Consumer sentiment dipped 10.5% in May, dropping to its lowest reading in nearly five months, according to data released Friday.
The final May results of the Michigan Index of Consumer Sentiment showed a decline to 69.1, a more than eight-point drop from April. The drop comes after consumer sentiment has mostly moved sideways this year.
Data showed consumers are worried about work stability, as sentiment continued to be weighed down by the prospect of continued high interest rates, said Survey Director Joanne Hsu.
“Consumers expressed particular concern over labor markets; they expect unemployment rates to rise and income growth to slow,” Hsu wrote. “These deteriorating expectations suggest that multiple factors pose downside risk for consumer spending.”
Despite the drop, the reading came in above economist forecasts. Plus, Hsu pointed out that sentiment is still 20% better than the same point last year, and well above the all-time low hit during the peak of inflationary pressure in June 2022.
The survey showed that inflation expectations continued to move higher, with consumers expecting prices in the coming year to move higher by 3.3%, an increase in last month and higher than the pre-pandemic range. Fed officials follow consumer inflation expectations as a gauge of the direction of price pressures.
-Terry Lane
Aircraft Sales Power Durable Goods Orders for Third Month In Surprise Increase
18 hr 12 min ago
In another sign of a hot economy, new orders for durable goods increased 0.7%, up for the third consecutive month, surprising economists with an unexpected jump in aircraft orders.
Transportation equipment orders rose by $1.1 billion, a category that largely reflects aircraft sales, also moving higher for a third month. Taking out transportation sales, new durable goods orders increased 0.4%, according to data from the Census Bureau.
April’s increase in durable goods orders wasn’t as strong as the jump in March, where the data was revised lower to 0.8%. However, the data came in far better than economists expected. Forecasters surveyed by the Wall Street Journal and Dow Jones Newswire expected a 0.5% decline in durable goods orders, which is used as a gauge of U.S. business investment.
“Core capital goods orders, a useful gauge of the underlying trend in capital spending, outpaced expectations, and more than reversed the prior month’s decline,” wrote Bernard Yaros, lead U.S. economist at Oxford Economics.
The data also showed another jump in motor vehicles and parts, the sixth straight month moving higher, said Sal Guatieri, senior economist at BMO Capital Markets. He said the data potentially pointed to stronger-than-expected gross domestic product (GDP) growth in the second quarter.
“Despite elevated borrowing costs and stricter loan standards, U.S. business investment could pick up in the second quarter,” Guatieri said. “However, the manufacturing sector, as a whole, is expected to remain in low gear until interest rates ease, the greenback weakens, and the global economy strengthens.”
-Terry Lane
