The American consumer is feeling pessimistic.
One of the questions on the New York Fed’s monthly Survey of Consumer Expectations asks respondents how they expect their household spending to change over the next year. This has been a very jumpy indicator over the last several months, with expectations plummeting in February, spiking back up in March, and then falling to a new low in April.
Unfortunately, while not as dire as last month, consumer pessimism appears to be continuing. In May, the median consumer predicted that their household spending would increase by just 3.96% over the next year. This is slightly better than April’s median expectation of 3.78% growth, but much lower than the average prediction of 4.37% over the last year.
Consumer activities are a central part of the US economy: About 69% of GDP comes from personal consumption expenditures. What consumers plan to do, then, has a potentially enormous impact on economic growth.
Having a sense of consumer sentiment could be especially useful this week, as the biggest economic release of the week is Thursday’s retail sales report. Retail sales have been weak, moving nowhere in April and missing economists’ expectations in March. The ongoing consumer pessimism in the Fed’s survey could be an ill omen for retail bouncing back in the next few months.