Shoppers, with and without face masks wait in line at the Trader Joe's on Vine Street in the Hollywood section of Los Angeles on May 15. A report said consumer confidence improved slightly in May with the reopening of the economy in numerous states. Photo by Jim Ruymen/UPI | License Photo
May 26 (UPI) -- Consumer confidence surprised experts by rising slightly in May after sharp declines the previous two months, hinting that the gradual reopening of the economy is having an impact.
The Conference Board Consumer Confidence Index improved to 86.6 in May, an increase from 85.7 points in April. A Dow Jones poll of economists had predicted consumer confidence would fall to 82.3 this month.
However, the Present Situation Index, based on consumers' assessment of current business and labor market conditions, declined from 73.0 to 71.1.
"Following two months of rapid decline, the free-fall in confidence stopped in May," Lynn Franco, senior director of economic indicators at The Conference Board, said. "The severe and widespread impact of COVID-19 has been mostly reflected in the Present Situation Index, which has plummeted nearly 100 points since the onset of the pandemic."
The board said the Expectations Index, based on consumers' short-term outlook for income, businesses and labor market conditions, improved from 94.3 last month to 96.9 in May, possibly benefiting the most from the state economies reopening.
"Consumers remain concerned about their financial prospects," Franco said. "In addition, inflation expectations continue to climb, which could lead to a sense of diminished purchasing power and curtail spending. While the decline in confidence appears to have stopped for the moment, the uneven path to recovery and potential second wave are likely to keep a cloud of uncertainty hanging over consumers."
Every state had announced by Tuesday reopening its economy in some form, allowing beaches, retail and restaurants to run their businesses on a limited basis, with some social distancing restrictions.