Consumer confidence in the U.S. declines ahead of debt ceiling deal

U.S. consumer confidence fell this month as views about the current state of the labor market and the outlook for business conditions slipped ahead of a deal to raise the debt ceiling.

The Conference Board’s index declined to 102.3 from a upwardly revised 103.7 a month earlier, data out Tuesday showed. The median forecast in a Bloomberg survey of economists called for a reading of 99.

The group’s gauge of current conditions decreased to 148.6, the lowest level this year. A measure of expectations – which reflects consumers’ six-month outlook – edged down, reflecting the smallest share of respondents since 2011 expecting better business conditions.

Results of the survey preceded the tentative deal reached by White House and Republican negotiators to raise the debt ceiling.

“Consumer confidence declined in May as consumers’ view of current conditions became somewhat less upbeat while their expectations remained gloomy,” said Ataman Ozyildirim, senior director of economics at the Conference Board. “However, expectations for jobs and incomes over the next six months held relatively steady.”

The confidence gauge remains well below pre-pandemic levels and highlights the strain from still-elevated inflation and higher borrowing costs. The share of consumers who said jobs were “plentiful” in May fell to the lowest level in more than two years. A greater share also reported they were hard to get.

The difference between the two measures – a metric watched closely by economists to gauge the tightness of the labor market – also dropped to the lowest level since April 2021.

Still, buying plans for cars, homes and major appliances increased, suggesting resilient household spending.

The median inflation rate seen over the next 12 months was little changed, according to the Conference Board. A government report out last week showed the Federal Reserve’s preferred core inflation metrics accelerated last month.

Separate data out last week from the University of Michigan showed consumer sentiment dropped in May as Americans grew wary of both current conditions and the outlook.