Consumer Confidence Slips as Inflation Pressures Weigh on Housing, Labor Sentiment — Evening Brief – 05.26.26
U.S. consumer confidence pulled back in May but came in slightly above expectations, while a separate report showed home prices declining in inflation-adjusted terms for a tenth consecutive month, painting a cautious picture of the consumer heading into summer.
The Conference Board’s Consumer Confidence Index edged down to 93.1 in May from a revised 98.8 in April, topping the 92.0 consensus estimate. A rebound in the forward-looking Expectations Index to 74.4 from a revised 73.4 helped offset a decline in the Present Situation Index, which fell to 121.2 from a revised 124.4.
“Consumer appraisals of current business conditions and the current labor market were moderately less positive compared to last month,” said Dana M. Peterson, Chief Economist at The Conference Board. “This was somewhat offset by modest improvements in consumers’ expectations for business conditions and the labor market six months from now. Meanwhile, income expectations eased in May, as those anticipating less income rose.”
The gap between consumers describing jobs as plentiful versus hard to get narrowed by 0.6 percentage points to +6.9%. Average and median 12-month inflation expectations edged lower but remained elevated, and nearly 50% of consumers anticipated higher interest rates over the next 12 months, reflecting intensifying inflationary pressures tied to the ongoing Middle East conflict.
On the housing front, the S&P Cotality Case-Shiller 20-City Home Price Index fell 0.2% month-over-month on a seasonally adjusted basis in March, missing the +0.1% consensus. On an unadjusted basis, the index rose 0.8% year-over-year, below the 1.0% consensus.
“With consumer inflation accelerating to roughly 3.3% in March, U.S. home values have now fallen in real terms for the 10th consecutive month, underscoring an ongoing erosion of inflation-adjusted housing wealth,” said Nicholas Godec, head of fixed income tradables and commodities at S&P Dow Jones Indices.
Regional performance remained sharply divided. Chicago led all cities with a 6.1% annual gain, followed by New York at 4.0% and Cleveland at 3.0%. Seattle posted the steepest decline at -2.5% year-over-year, followed by Denver at -2.0% and Tampa at -1.9%. Dallas, Phoenix, Los Angeles and Washington, D.C. also saw prices retreat.