The Conference Board's Consumer Confidence Index® fell for the first time in four months in May, dropping 0.7 points to 93.1. Despite the slight dip, the index came in above the forecast of 91.9. Note that the survey period for this month's results was May 1st-19th, a timeframe that includes the ongoing war in the Middle East that is placing upward pressure on prices globally.
The Present Situation Index, which is based on consumers' assessment of current business and labor market conditions, fell 3.2 points to 121.2. Meanwhile, the Expectations Index, which is based on consumers' short-term outlook for income, business, and labor market conditions, rose 1.0 point to 74.4. Note that a level of 80 or below for the Expectations Index historically signals a recession within the next year and the index has been below 80 since February 2025.
“Consumer confidence edged downward in May as the inflationary impacts of the war in the Middle East intensified,” said Dana M Peterson, Chief Economist, The Conference Board. “Consumer appraisals of current business conditions and the current labor market were moderately less positive compared to last month. This was somewhat offset by modest improvements in consumers’ expectations for business conditions and the labor market six months from now. Meanwhile, income expectations eased in May, as those anticipating less income rose.”
Consumers’ write-in responses on factors affecting the economy continued to skew towards pessimism in May. References to prices and oil and gas increased in frequency for a second consecutive month, while mentions of war, geopolitics, and conflict remained elevated—likely signaling consumers’ underlying concerns about the inflationary impacts of the war in the Middle East on their wallets.
Consumers’ average and median 12-month inflation expectations ticked downward but remained elevated. The percentage of consumers saying interest rates over the next 12 months will be higher on net stood at nearly 50% in May. The ongoing stock market rally—largely fueled by the tech sector and rising hopes for an end to the Middle East conflict--likely influenced consumer expectations of higher stock prices a year from now.
Background on the Consumer Confidence Index
The Conference Board Consumer Confidence Index measures the consumers attitudes and confidence in the economy, business conditions, and labor market, with higher readings indicating higher optimism. The general assumption is that when consumers are more optimistic they will spend more and stimulate economic growth. However, if consumers are pessimistic then spending will decline and the economy may slow down. The index is based on a 5 question survey, with 2 questions related to present conditions and 3 questions related to future expectations. The survey began in 1967 and was conducted every two months but changed to monthly reporting in 1977.
