Consumer Confidence in U.S. Falls to Six-Month Low

Consumer Confidence in U.S. Falls to Six-Month LowConsumer confidence in the U.S. fell to a six-month low in May as Americans became less sanguine about the prospects for the economy.

The University of Michigan reported on Friday May 29, 2015 that its final index of sentiment for the month decreased -5.4% to 90.7 from 95.9 in April. It marked the biggest decline since the end of 2012. (Source: University of Michigan, May 29, 2015.)

Consumer confidence gives us an idea about consumer spending; the better consumers feel, the more money they spend. This results in higher consumption, which is essentially the biggest portion of the U.S. gross domestic product (GDP).

The current economic conditions decreased to 100.8 from 107.0 in April. The index for consumer expectation also fell to 84.2 from 88.8 in April.

Current economic conditions are considered adverse or negative when an economy is contracting and positive when an economy is expanding. Economic conditions are influenced by the state of the global economy, fiscal and monetary policies, inflation, unemployment rate, and currency exchange rate among other factors.

The decline for the month as a whole was still substantial as consumers have adopted more modest prospects for a rebound following the economy’s dismal first-quarter performance.

On Friday, May 29, the Commerce Department said gross domestic product declined at a 0.7% annualized rate in the first quarter, revised from a previously reported 0.2% gain. (Source: Bureau of Economic Analysis, May 29, 2015.)

A larger trade deficit and smaller accumulation of inventories by businesses accounted for much more of the downward revision than previously thought. Trade was hit both by the strong dollar and the ports dispute, which weighed on exports through the quarter and then unleashed a flood of imports in March after it was resolved. (Source: Reuters, May 29, 2015.)