Consumer Confidence Down in May 2011

According to the Conference Board, the Confidence Index dropped to 60.8 in May 2011 from 66 in April 2011; it had previously risen in April.  The Confidence Index is the average of two indices: Present Situation and Expectations. Present Situation Index decreased to 39.3 from 40.2 and Expectations Index declined to 75.2 from 83.2. The base year for the Index is 1985 which would be equal to 100%.  The May cutoff date for this survey was May 18, 2011.

Present Situation Index

The present situation index is based upon current business conditions and the labor market.  This index dropped slightly from the previous month but the responses were varied.  Those answering business conditions were “good” decreased from 14.6% to 15.5%; those answering business conditions were “bad” increased to 37.1% from 35.9%.  Those answering that jobs were “hard to get” increased to 43.9% from 42.4%; while those answering jobs were “plentiful” increased to 5.6% from 5.1%.

Expectations Index

The Expectations Index is based upon business conditions, employment and income over the next six months.  This index improved in April but dropped in May.  Those expecting business to improve over the next six months decreased to 17% from 19.2%; those predicting business conditions will get worse increased to 15.5% from 14%.  Those expecting more jobs in the next six month decreased from 15.9% from 17.8%; those anticipating fewer jobs increased to 20.8% from 18.7%. Those expecting an increase in income declined to 14.8% from 17%.

Confidence had been improving but we had a setback in May. The key reasons were concern about future business, employment, income prospects and inflation.  The price of gas and food had an impact on the opinions in the first half of May.  Hopefully, June will have a more positive outcome.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

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