Consumer Confidence Rebounds in May

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Consumer Confidence Rebounds in May

WASHINGTON -- The nation's consumer confidence index bounced back in May, making it appear that Americans are unaffected by gasoline prices above $3 per gallon, MarketWatch reported. The consumer confidence index rose to 108.0 in May from April's revised 106.3, the Conference Board reported yesterday.

Economists expected a May increase to about 105.8, according to the median forecast of economists surveyed by MarketWatch. In addition, confidence in April was better than originally reported, revised at 106.3, from the initial estimate of 104.0, the report stated.

"It appears that consumers are continuing to show none of the pessimism that some feared would emerge following last year's mid-year growth slowdown," Mike Englund, chief economist at Action Economics, said in a note to clients obtained by MarketWatch.

Consumers were upbeat about current conditions, although rising gasoline prices are still a concern, Lynn Franco, director of the Conference Board's consumer research center, told MarketWatch. "All in all, confidence levels continue to suggest growth, albeit at a slow pace," Franco said.

Increasing retail gasoline prices caused inflation expectations to reach 5.5 percent, the highest level since August.

Confidence still remains below the average 110.4 level of December to February, the report stated.

However, these findings diverge from a recent PricewaterhouseCoopers’ survey of consumer product company executives, which found that 50 percent of those polled are optimistic about the U.S. economy over the next 12 months -- a decrease from the 72 percent seen last quarter.

The PricewaterhouseCoopers' Retail & Consumer Industry Practice's Consumer Products Barometer, released yesterday, also found that 67 percent of executives are upbeat about the global economy.

"As an industry driven by commodity pricing, consumer products companies are constantly affected by rising input costs and executives are showing concern about the possible impact of inflationary pressures on our economy," John Maxwell, leader of PricewaterhouseCoopers' Retail & Consumer Industry Practice, said in a written statement. "While the Barometer found that there is a substantial concern over the slowing economy, it was surprising that 70 percent of executives believe the domestic economy is actually growing."

Consumer product executives that are planning major new investments of capital fell eight percentage points to 48 percent, compared to the previous quarter. The survey also found that approximately 75 percent of consumer products companies are pursuing other business initiatives over the next year, including expansion into new markets (50 percent); and some type of merger and acquisition activity (36 percent).

Oil and energy prices remained a top concern as 70 percent of executives reported oil and energy costs were a prospective barrier to projected growth over the next year, the survey found.

"While most executives were concerned about a lack of strength in market demand last quarter, we saw a significant increase in the concern over escalating energy prices in Q1," Maxwell said. "With no end in sight for skyrocketing oil prices, we expect this trend of energy concerns to continue into the second quarter of 2007."