Small businesses in Columbus, Ohio are looking to the next phase as the state continues to deal with COVID-19 amid calls for a reopening of the economy. On Friday, some bakeries and barbershops reopened while staying safe. (May 15).
Consumer confidence edged higher in May after two months of steep declines as businesses shuttered by the coronavirus pandemic gradually reopened but the measure still hovers near six-year lows.
The closely-watched index of Americans’ outlook rose to 86.6 from 85.7 in April, the Conference Board said Tuesday, driven by a pickup in expectations for the next six months. That comes after a record plunge last month. Economists surveyed by Bloomberg had forecast a slightly bigger increase to 87.
“Following two months of rapid decline, the free-fall in confidence stopped in May,” says Lynn Franco, the Conference Board’s senior director of economic indicators. “Short-term expectations moderately increased as the gradual reopening of the economy helped improve consumer spirits. However, consumers remain concerned about their financial prospects.”
All 50 states recently have begun phased reopenings of their economies after nearly all closed nonessential businesses in March to curtail the spread of the virus. The abrupt shutdowns have triggered the worst recession in modern history, with 20.5 million jobs lost in April and as many as another 10 million or so expected to be shed this month. The U.S. economy is likely to shrink at a staggering 30% to 40% annual rate in the current quarter.
The consumer confidence Index is closely watched because it can foreshadow future spending, which makes up about 70% of economic activity.
Americans’ view of present conditions actually declined slightly this month and has dropped about 40% since the start of the pandemic. But their short-term outlook improved.
The share of survey respondents saying business conditions are “good” fell to 16.3% from 19.9% while those same conditions are “bad” increased to 52.1% from 45.3%. Their appraisal of the labor market was mixed, with 17.4% saying jobs are “plentiful,” down from 18.8% in April. But the portion saying jobs are “hard to get” also declined, to 27.8% from 34.5%.
Consumers, though, were a bit more optimistic about the short-term outlook, with 43.3% expecting business conditions to improve over the next six months, up from 39.8%. The share expecting conditions to worsen fell to 21.4% from 25.1%. Just 39.3% expect more jobs in the months ahead, down from 41.2%. But the portion anticipating fewer jobs also dipped, to 20.2% from 21.2%.
The share of consumers expecting an increase in income fell to 14% from 17.2%, while the portion anticipating a drop also decreased, to 15% from 18.4%.
“Consumers downbeat views about future income prospects may restrain consumer spending and the overall recovery,” Oxford Economics wrote in a note to clients.
There were some hopeful signs in the report. The share of consumers planning to buy a car the next six months rose to 11.2% from 8.1% in April, not much below February’s 12.6%. And 46.9% plan to purchase a major appliance, up from 45.8%, though well below the recent peak of 55% in February. But the share planning to buy a home dropped for the third straight month, to 5% from 5.3%.
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