US consumer confidence plummets as high inflation darkens outlook, S&P 500 maintains losses

KEY POINTS OF CONSUMER CONFIDENCE:

  • United States cconsumer trust falls to 106.4 in May from an upwardly revised reading of 108.6 in April, beating market expectations
  • Current situation and expectations index decline
  • The S&P 500 holds the most sessions losses after survey results cross wires as Wall Street remains concerned about possible economic slowdown

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A popular gauge of U.S. consumer sentiment deteriorated this month, but fell less than expected after a slight increase in April. Inflation, which is rising at the fastest rate in four decades, has been the main source of consternation for most Americans of late, as the rising cost of living has squeezed real incomes, stretching household budgets and reducing purchasing power.

According to the Conference Board, its consumer confidence index fell to 106.04 in May from an upwardly revised figure of 108.6 in the prior period. Economists polled by Bloomberg News had expected the index drag at 103.9.

Digging deeper into the survey results, the current situation indicator, based on people’s assessment of current business and employment conditions, fell to 149.6 from 152.6. The slight deterioration of this component was motivated only by a perceived relaxation in the job market, a discouraging development for future consumption, the main driver of the country’s economic growth. Either way, the index remains at a high level, signaling that activity did not contract further in the second quarter.

Elsewhere, the expectations index, which measures near-term prospects for earnings, the business environment and the job market, slipped to 77.5 from 79, dragged down by fears that the he economy will pick up speed in the coming months.

Source: Conference Board

The drop in consumer confidence is concerning given that household consumption accounts for about two-thirds of US GDP. While recent data has shown that Americans don’t always act the way they feel, it’s still important to watch attitudes because any pullback in spending in response to sour sentiment could hurt the recovery.

The S&P 500 posted most of the session’s losses after the survey results crossed the wires as Wall Street remains very concerned about the possibility of a recession as the Fed continues its aggressive tightening plans. Monetary Policy. Traders will have another chance to gauge the health of the economy this week, with key economic releases on the calendar, including the May ISMs and Nonfarm Payrolls. If the data shows further weakening, risky assets could struggle to make a meaningful comeback in the near term.

S&P 500 FIVE-MINUTE CHART

US consumer confidence plummets as high inflation darkens outlook, S&P 500 maintains losses

Source: TradingView

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—Written by Diego Colman, Market Strategist for DailyFX

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