American consumers are more confident generally, but finances remain concerning

With the Fed still holding firm on interest rates and the election ahead, U.S. consumers have revealed mixed sentiment in new research from The Conference Board.

Its Consumer Confidence Index for May increased to 102.0 from April’s upwardly revised 97.5, while its Present Situation Index—based on consumers' assessment of current business and labor market conditions—increased to 143.1 from 140.6.

However, finances remain a concern for many Americans and the data reflects this with a dip in respondents’ assessment of their family’s financial situation now and going forward and a rise in recession expectation for the next 12 months.

Inflation and interest rates remain key concerns for American households with more people expecting a rise in rates in the year ahead, following the dovish expectations of investors who told a recent poll that it’s their sentiment that’s falling rather than rates.

"According to May's write-in responses, consumers cited prices, especially for food and groceries, as having the greatest impact on their view of the U.S. economy,” explained Dana M. Peterson, chief economist at The Conference Board. “Notably, average 12-month inflation expectations ticked up from 5.3% to 5.4%. Perhaps as a consequence, the share of consumers expecting higher interest rates over the year ahead also rose, from 55.2% to 56.2%.”

While the share of those who expect their incomes to increase in the short term was barely changed from the previous month (around 17%) the share who expect their income to decrease was 11%, down three percentage points from April. Optimism about the labor market saw some improvement in terms of availability of jobs over the next six months, although a greater share of people think there will be fewer jobs.

The research also found that home purchase intentions continued at around their lowest level since August 2012, there was a slight uptick for intentions to buy autos and some other big-ticket items.

"Compared to last month, confidence improved among consumers of all age groups,” added Peterson. “In terms of income, those making over $100K expressed the largest rise in confidence. On a six-month moving average basis, confidence continued to be highest among the youngest (under 35) and wealthiest (making over $100K) consumers."