Consumer sentiment slid in May, according to a key measurement released Friday, begging the question of just what is weighing down the American consumer?
With the plunge in gasoline prices and a steadily improving job market, economists expected the consumer to push economic growth upwards. Instead, there have been a range of weak indicators and Friday’s was the University of Michigan’s consumer sentiment index, which fell 7.3 points in May, the lowest reading in nine months.
“Although sentiment fell in May, it was still above its average last year. Conditions for consumers are solid, and sentiment should increase through the rest of this year and into next,” Stu Hoffman, chief economist for PNC Financial Services in Pittsburgh, said in an analysis of the sentiment numbers.
That optimism stands out against what the sentiment numbers actually showed.
“Consumers were less upbeat about both current conditions and the near-term outlook,” said Hoffman.
The weak reading on consumer sentiment comes after retailers saw anemic sales in April, with the Commerce Department reporting sales unchanged during the month. Consumer spending rose by just 2.5 percent in 2014 and was expected to grow stronger this year.
“We can’t blame bad weather for another month of disappointing retail sales. The April retail sales numbers suggest weaker real consumer spending growth in Q2 than previously expected,” Scott Anderson, chief economist for Bank of the West in San Francisco, wrote in a Friday Economic Outlook report. “A stronger consumer is needed to offset weak business investment and declining exports.”
The U.S. economy grew at a “barely there” rate of 0.2 percent from January through March. A revised growth estimate is due from the government on May 29 and it is expected to show that the economy went backward during the first quarter.
“So are we headed for recession? I don’t think so,” said Anderson, who nonetheless is scaling back his forecast for the year.
Many economists are now projecting the economy will grow at a sub-par annual rate of 2.3 percent of less in 2015. That’s not a recession but it leaves the U.S. economy in a vulnerable place if there are any economic shocks.