U.S. consumer confidence fell in May to a new 28-year low according to a Reuters/University of Michigan survey. The index fell from 62.6 the month prior to 59.5, well below the consensus figure of 62. Bloomberg:
Consumer spending, the biggest part of the economy, is cooling as surging food and fuel costs erode Americans’ buying power and job losses mount. Declining home prices and stricter lending rules are also preventing owners from tapping real- estate equity to buy expensive items like cars and furniture, raising the risk that growth will stall in coming months.
“The consumer is getting extremely grumpy,” said Brian Bethune, director of financial economics at Global Insight Inc. in Lexington, Massachusetts, who forecast confidence would drop to 59.6. “The economy is flirting with a recession. The only thing keeping it out is this huge amount of pump-priming going on,” including Federal Reserve interest-rate reductions, the government’s stimulus package and discounts by retailers.
Consumer confidence has been at record low levels for months now and, should the weakness persist, it can only be a matter of time before a slowdown in consumption translates into poorer earnings for businesses, job losses, and plunging investment.