WASHINGTON, D.C.: Americans are increasingly cutting back on spending despite U.S. stock markets hovering near record highs, as elevated inflation and soaring gasoline prices continue to strain household finances, according to new survey data released on May 26.
The Conference Board said its consumer confidence index slipped slightly to 93.1 in May from the previous month, marking the first decline after three consecutive monthly gains.
Although confidence has not dropped as sharply as some other measures of consumer sentiment this year, it remains far below pre-pandemic levels, when the index regularly exceeded 130.
The weaker mood contrasts sharply with strong stock market performance and a still-growing U.S. economy.
Economists say the divide reflects widening inequality, with wealthier Americans benefiting from rising financial markets while lower-income households struggle with rising costs.
The survey showed confidence increased among households earning at least US$100,000 annually, but fell among most lower-income groups.
“The prospect of higher prices and faster inflation continues to loom over confidence readings with many households taking a more cautious approach to purchases this year,” said Ben Ayers, senior economist at Nationwide.
The report found that roughly two-thirds of Americans said they were reducing spending because of rising prices.
Many respondents said they were delaying major purchases and cutting back on items such as clothing, shoes, hobbies, toys, and games.
Gasoline prices have remained a major source of pressure. The national average price for gasoline has climbed to $4.49 per gallon, up sharply from $2.98 before the conflict in Iran began in late February. Prices have stayed near or above $4.50 for most of May.
Inflation rose to 3.8 percent in April, the highest level in three years and well above the Federal Reserve’s 2 percent target.
Alongside higher fuel prices, grocery costs have also risen, partly due to increased shipping expenses linked to disruptions caused by the war in Iran. Beef prices have also surged as drought conditions and supply issues have reduced cattle herds.
Higher prices are now outpacing wage growth for many workers. Adjusted for inflation, average hourly earnings fell in April from a year earlier for the first time in three years, reducing purchasing power for many households.
Other economic data point to growing caution among consumers. Retail sales, adjusted for inflation, declined in April after a strong rise in March.
Meanwhile, a separate University of Michigan survey released last week showed consumer sentiment falling to a record low of 44.8 in May, with many respondents saying rising prices were hurting their finances.
The Conference Board survey also suggested Americans are becoming less optimistic about the labor market.
The share of respondents who said jobs were “plentiful” fell to 25.5 percent, the lowest level in three years. At the same time, only 18.6 percent described jobs as “hard to get,” reflecting what economists describe as a “low-hire, low-fire” labor market.
Ayers noted signs of optimism in the survey, including improved expectations for economic conditions six months from now, possibly reflecting hopes that the Iran conflict could ease by then.
