Consumer confidence improved in each of the past nine monthly surveys, rising to its highest level this month since October 2007, according to University of Michigan economist Richard Curtin, director of the Thomson Reuters/University of Michigan Surveys of Consumers. According to a release from the Ann Arbor-based institution, more favorable job and wage prospects were the main factors behind the improved outlook.
Curtin said, “Record numbers of consumers mentioned that they heard of favorable employment trends despite the jobs slowdown recently reported by the Labor Department," he said. "The continued revival of consumer confidence critically depends on renewed job growth. One issue that only a few consumers even mentioned was the potential impact on the domestic economy from the European financial crisis.”
Many more consumers reported hearing about recent job gains than job losses—the fewest consumers reported hearing of job losses in May than any time since mid 2007. In each of the past three months, a majority of consumers reported an improved economy and twice as many expected further improvement rather than renewed declines in the year ahead. Most consumers, however, expected the gains to be modest. Confidence in the government's economic policies remained relatively low, with 41 percent holding negative views. These surveys, conducted by the U-M Institute for Social Research, have been monitoring consumer attitudes and expectations for over 60 years.
Curtin added, "Consumer confidence was nearly as high in the past two years before the gains were reversed." He added, "While gas prices and economic policy debates played a role in the pull backs, changes in job expectations also had a critical impact. The upbeat consumer reports on jobs could mean that more positive numbers will soon be reported by the government, or that consumers have yet again pushed their expectations beyond the likely performance of the economy. The most likely prospect is that job growth resumes at a modest pace and that confidence remains largely unchanged until after the November election and decisions about tax policy are made."
Favorable views on buying conditions for household durables were cited by 63 percent in May, the highest level in more than a year, driven up by the availability of price discounts. Vehicle buying conditions were judged more favorably in May by households with incomes over $75,000, those most likely to purchase new vehicles. Favorable views of vehicle buying conditions were held by 72 percent, up from 67 percent one month ago and 57 percent one year ago.