Consumer confidence wanes in May on jobs, higher prices

Confidence had increased for five straight months, reaching a three-year high in February, but since then been lowered by a surge in food and gas prices, along with shakiness in the labor market. 

A healthy economy registers readings of at least 90, a number the report hasn’t hit since the recession began in December 2007.

The report’s gauge of expectations for the next six months dropped to 75.2, from 83.2, the lowest since October. The measure of present conditions also decreased — to 39.3 in May from 40.2 in April. 

A weak housing market isn’t helping out much, either. 

New data released Tuesday, shows that home prices fell 4.2 percent in the first quarter of 2011, hitting a new low and threatening the economic recovery, according to S&P/Case-Shiller 20-city home-price index.

The index dropped 3.6 percent from March 2010 to 138.16, the lowest level in eight years. Home prices were down 5.1 percent in all of 2010.

The job market is another hurdle to better consumer confidence. 

The Conference Board’s respondents that are expecting more jobs to become available in the next six months decreased to 15.9 in May from 17.8 the previous month. Those expecting their incomes to go up in the next six months fell to 14.8 percent from 17 percent.

Consumers saying jobs are harder to get increased to 43.9 percent from 42.4 percent.

At the end of the week, all attention will turn to the latest unemployment numbers from the Labor Department. Unemployment was up to 9 percent last month, and Friday’s report will either provide a much-needed boost to a slower-than-expected spring or further dent the economy’s recovery. 

High gas and food prices are putting pressure on household budgets, making consumers more pessimistic about their incomes. 

Consumer spending slowed to a 2.2 percent annual pace in the first quarter, the Commerce Department said May 26. 

Fuel prices, while easing in May, have prompted Americans to cut back on less-essential items. The average price of regular fuel was $3.78 a gallon yesterday, according to AAA, the nation’s biggest motoring organization. It had reached $3.99 on May 4, the highest level since July 2008.

Two other recent consumer confidence reports, showed improvement in sentiment. The Thomson Reuters/University of Michigan final index of consumer sentiment increased to 74.3 in May from 69.8 while the Bloomberg Consumer Comfort Index increased to minus 48.4 in the week to May 22 from a nine-month low the prior week.

Meanwhile, the Institute for Supply Management-Chicago Inc. said its May business barometer dropped to 56.6 from 67.6 in April. 

Although readings higher than 50 signal expansion, the measure is the lowest since November 2009. The Chicago report serves as a guide for economists for an early reading on the national outlook.