Digital News Report – Consumer confidence improved in May, according to Thomson Reuters University of Michigan. The good news pushed stock higher on Friday.
The Thomson Reuters/University of Michigan Consumer Sentiment index was higher than economists expected. The Dow Jones Industrial Average was up 38.82 (+0.31%) to 12,441.58. The S&P 500 and Nasdaq showed similar gains.
Despite the improved sentiment, there are still concerns. “Stagnant incomes and higher prices have meant that consumers judged their inflation adjusted income expectations worse than anytime since the early 1980’s,” said Richard T. Curtin, Director of Thomson Reuters/University of Michigan Surveys of Consumers.
Respondents said they don’t expect their income to keep up with inflation over the next five years. Curtin said that if it wasn’t for the payroll tax cut, spending cutbacks would have been “quite likely”. This could change at the end of this year if the payroll tax cuts end.
Sentiment dipped in April but was up 6.4 percent to 73.6 in May. Since May of 2010, sentiment is only 1.1 percent higher. Consumer expectations were higher too, but the current conditions index was lower.
“Consumers no longer anticipate a rising standard of living in the next several years,” Curtin says. “While fuel and food inflation is not much of a concern for monetary policy, rising wages would need to be dealt with more seriously as an indicator of higher future inflation.”
By Tina Brown