Consumer confidence unexpectedly rose in May, ending three straight months of declines as Americans cheered a resilient labor market.
The latest index reading from the Conference Board was 102, above 97.5 in April and higher than the 96 economists surveyed by Bloomberg had expected.
"Consumers’ assessment of current business conditions was slightly less positive than last month," Conference Board chief economist Dana Peterson said in the release. "However, the strong labor market continued to bolster consumers’ overall assessment of the present situation. Views of current labor market conditions improved in May, as fewer respondents said jobs were ‘hard to get.'"
Peterson added, "Fewer consumers expected deterioration in future business conditions, job availability, and income, resulting in an increase in the Expectation Index."
Just 13.5% of consumers said jobs were "hard to get," down from 15.5% in April.
This comes as the economy has continued to show more resilience than many expected. While the unemployment rate ticked up slightly to 3.9% from 3.8% in April, it's been below 4% for 27 months, the longest stretch since the Vietnam War. Meanwhile, the number of Americans filing for unemployment benefits remains low, and various trackers of wage growth show workers are seeing pay increases above the rate of inflation.
Still, elevated prices remain a key sticking point for consumers and help explain why confidence hasn't fully rebounded. Consumers cited prices — in particular those for food and groceries — as having "the greatest impact" on their view of the US economy. The Conference Board's reading of 12-month inflation expectations ticked up to 5.4% from 5.3% the month prior. This also came with a slight uptick in the percentage of consumers expecting higher interest rates over the next year.
A fresh reading on the Fed's preferred inflation gauge, the Personal Consumption Expenditures Index, is expected on Friday morning.
The Conference Board also provided insight into who within the population is feeling better about the economy.
With the stock market at record highs, the wealthiest Americans are the most upbeat about the state of the economy. Consumers making more than $100,000 a year expressed "the largest rise in confidence" among all income cohorts, per the Conference Board. On a six-month rolling basis, confidence has been the highest among consumers under 35 years old who make more than $100,000 a year, per Peterson.
More than 48% of consumers said they expect stock prices to rise in the next year, the third-highest reading in the Conference Board's history, per Charles Schwab senior investment strategist Kevin Gordon.
"We have a historically low unemployment rate and the wealth effects of investing in the market continue to go up. So, it shouldn't be a major surprise that consumers are feeling well," Invesco global markets strategist Brian Levitt told Yahoo Finance.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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