Inflation could show indications of slowing; however, the cost-intensive market is still making American consumers concerned about the future direction the economic system is heading in.
The Confidence index for consumers from the Conference Board decreased to 106.4 for May. That’s a drop from an updated 108.6 for April as per data released on Tuesday. The decline was less than 103.9 analysts anticipated, according to Refinitiv.
“We still have headwinds from the war in Ukraine, rising prices, interest rate hikes, but consumers have been weathering it pretty well — even though we did have a slight decline, it’s relatively a strong reading,” said Lynn Franco, senior director of economic indicators at The Conference Board.
“And a lot of that comes from the fact that confidence has been supported by strong job growth, so that’s helping to offset some of these challenges that consumers have been facing over the last couple of months.”
People go to a grocery retailer on May 12, 2022, in New York City.
For most Americans, the three most considerable costs include transportation, housing, and food -each of which has witnessed significant price rises over the past year.
According to the Commerce Department, April’s Consumer Expenditures Index of inflation, which excludes the volatile energy and food price, rose by 4.9 percent year-over-year, which is down from an increase of 5.2 percentage increase in March.
Index published on Tuesday. According to the S&P Case-Shiller home price index, the cost of homes has increased to more than 20 percent in March from the previous month. This is the most significant price increase in over 35 years of information.
The price rises reflect an array of factors, including the increase in demand and the effects of the Russian attack on Ukraine. Prices for air tickets are increasing, and gas prices have set a new record during the weekend of Thanksgiving and topped out at a national mean that was $4.62 for a gallon of gasoline that is regular on Memorial Day. At the same time last year, the average for all of us of $3.05 for a gallon.
Even though motorists face some sticker shock, it’s been more difficult. In the context of inflation, gas prices were the highest in June 2008, reaching $5.38 each gallon as per the US Energy Information Administration.
However, despite the higher cost of living, the consumers are spending.US consumer sales during April rose 0.9 percent from the previous month and 8.2 percent more than the April 2021 figure the Commerce Department released earlier in the month.
“We do see a softening in the durable, big-ticket item purchases, and part of that is interest rate hikes. Also, consumers are now pivoting from big-ticket items to services,” Franco stated.”You can only buy so many washing machines. So now it’s the shift to services and going back to dining out, movies, sporting events, etc.”
But this current period of rising inflation is creating a divide in how consumers purchase and spend. Retailers have said that even though sales of luxury items have been solid, lower-income customers aren’t buying more discretionary products and are looking for cheaper generic items.
Consumers are beginning to reduce their purchases, according to the survey results published this week by the NPD Group. According to the market research firm in New York, in the initial quarter of 2022, consumers spent 6% less on things at the stores than they did during the initial three months in 2021.
“There is a tug-of-war between the consumer’s desire to buy what they want and the need to make concessions based on the higher prices hitting their wallets,” Marshal Cohen, NPD’s chief retail industry advisor, declared in an announcement.
Inflation is a top concern for consumers, the Conference Board’s Franco stated, noting that expectations of inflation for May were unchanged from the high levels of April.
“Looking ahead, expect surging prices and additional interest rate hikes to pose continued downside risks to consumer spending this year,” she added.