Consumer Confidence Fell in April Amid High Interest Rates, Economic Uncertainty

Consumer confidence in the U.S. economy dropped in April, as high inflation, rising interest rates and the shock waves of a banking crisis in March took their toll on optimism.

The Conference Board's Consumer Confidence Index fell in May to 102.3, down from an upwardly revised 103.7 in April. The index measures consumer attitudes and plans on spending, vacations as well as their expectations for inflation, the stock market and interest rates.

"Consumers view of current conditions became somewhat less upbeat while their expectations remained gloomy," said Ataman Ozyildirim, senior director of economics at the non-profit research group.

The board also posted a decline in its expectations index, which measures consumers’ six-month outlook for income, business and labor conditions. It slipped to 71.5 this month from 71.7 in April.

A reading under 80 often signals the U.S. economy is headed for a recession in the coming year.

The latest report in an indication that the economy continues to cool and could possibly give the Federal Reserve a chance to take a breather in its fight to curb inflation at its next two-day meeting on June 13-14.

Last week, Minneapolis Federal Reserve President Neel Kashkari said another hike in the central bank’s key interest rate to fight inflation is a close call.

A report last week showed consumer spending jumped 0.8% last month after gaining 0.1% in March. Another showed inflation ticked higher in April.

“Consumers’ inflation expectations remain elevated, but stable," Ozyildirim said. "Consumers in May expected inflation to average 6.1% over the next 12 months—essentially unchanged from 6.2% in April, though down substantially from the peak of 7.9% reached last year. "

The Conference Board's report is a leading indicator used to predict consumer spending, which drives more than two-thirds of U.S. economic activity.