Americans’ expectations for the economy deteriorated to a seven-month low in May, a sign that the rebound from weakness earlier this year may be limited by still-cautious consumers.
An expectations gauge that tracks where the economy is heading declined to 42.5 in May from 48 in the month prior, data from the Bloomberg Consumer Comfort Index showed today. The share of respondents who said the economy was getting worse climbed to the highest level this year. The weekly measure of sentiment declined to 34.1 in the period ended May 18 from 34.9, the third straight drop.
Wages last month failed to keep pace with a rising cost of living as prices increased for such necessities as food and fuel. Stronger hiring that leads to fatter paychecks would help spur confidence and provide households the wherewithal to boost their spending.
“We’re having a very disappointing rebound from a slowdown that was thought to have been caused only by the weather,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. The lagged effect of elevated interest rates and gasoline prices, as well as weaker equity gains, “have taken at least a temporary bite out of sentiment.”
Another report today showed claims for unemployment benefits rose more than forecast last week. Jobless claims increased by 28,000 to 326,000 in the week ended May 17, Labor Department figures showed in Washington.
Stock Index
Stocks were little changed at 9:33 a.m., with the Standard & Poor’s 500 Index rising less than 0.1 percent to 1,888.48.
Some 37 percent of those surveyed for the Bloomberg comfort index said the economy was worsening, up from 31 percent in April, while the share of respondents who saw an improvement dropped by the most since October.
Bloomberg’s weekly measure of the economy declined to 20.6 last week, the lowest level since early February, from 21.5 in the prior period.
The buying-climate measure, which asks consumers whether this is a good time to make purchases, dropped to a six-week low of 30.9 from 32.2. The gauge of personal finances held at 50.8, also the weakest since the first week of April.