ANN ARBOR.—Consumer confidence surged in the May 2003 survey for the second consecutive month, according to Richard Curtin, the Director of the University of Michigan’s Surveys of Consumers. “The May surge in consumer confidence was based solely on the expectation that the economy would improve during the year ahead,” said Curtin. Consumers continued to express quite negative views about their current financial situation. “Consumers provided a mixed assessment of the economy, as they were quite positive about the outlook for inflation and interest rates but still quite concerned about recent job losses and income declines,” Curtin noted. The Index of Consumer Sentiment was 92.1 in the of the gain was in the expectations components as consumers evaluations of current economic conditions actually worsened in May. The Index of Consumer Expectations, a closely watched component of the Index of Leading Economic Indicators, was 91.4 in May, up from 79.3 in April 2003. The Current Conditions Index, in contrast, fell to 93.2 in has regained about half of its peak-to-trough loss, while the Current Conditions Index remained near its ten-year low. Twice as many consumers expected the economy to improve during the year ahead in May as two months ago, and half of all consumers expected good times financially to persist over the next five years. “The anticipated revival in economic growth prompted consumers to also hold more positive views about future job prospects,” according to Curtin. The same type of surge in confidence occured immediately following the first Iraqi war, but rather than building on the renewed optimism, the jobless recovery that began in the Spring of 1991 reversed the entire confidence gain by the end of 1991. “Renewed growth in jobs and wages is again critical to insuring cumulative and sustained gains in consumer spending during the year ahead,” Curtin said. Declines in inflation and interest rates helped to support favorable personal financial expectations as well as positive home and vehicle buying attitudes. “Although more families reported that their finances had worsened than improved during the past year, nearly half of all consumers expected their living standard to improve during the year ahead largely due to lower inflation,” Curtin said. Home and vehicle buying attitudes posted strong gains in the May survey due to lower interest rates. “While it is likely that consumer spending will spark a revival in the overall economy, the gains will be uneven over time and across products,” according to Curtin. In contrast to the strong sales in interest-sensitive purchases of homes and vehicles, buying attitudes toward appliances, furniture, home electronics, and other household items remained near the lowest levels recorded in ten years. “Despite the recently enacted tax cuts, confidence in government economic policies remained near the lowest level recorded since President Bush first entered office,” said Curtin. Consumers have more frequently rated government economic policies unfavorably than favorably in each monthly survey since the start of 2003.
Surveys of Consumers
Internet: www.umich.edu/~umsurvey