WASHINGTON • Consumer confidence fell more than forecast in May, a sign consumer spending may be slow to pick up in the second quarter.
The Thomson Reuters/University of Michigan final index of sentiment dropped to 81.9 in May from 84.1 in April. The median projection in a Bloomberg survey of economists called for 82.5 after an initial May reading of 81.8.
Elevated gasoline prices and slow wage gains may be weighing on sentiment, though falling unemployment, near-record stock prices and higher property values could help bolster confidence. Income gains spurred by a tighter job market would provide a boost for the consumer spending that makes up almost 70 percent of the economy.
"The economy is sluggish, so we're not getting any major acceleration in sentiment," said David Sloan, senior economist at 4Cast Inc. in New York, speaking before the report. "The general direction is upward rather than downward as unemployment continues to fall. If wages were to pick up, that would help."
Estimates of the 62 economists in the Bloomberg survey ranged from 80 to 85. The index averaged 89 in the five years before December 2007, when the last recession began, and 64.2 during the 18-month contraction.
The Michigan sentiment survey's index of current conditions, which measures Americans' views of their personal finances, declined to 94.5 in May from 98.7 a month earlier. The initial May figure was 95.1.
The gauge of expectations six months from now decreased to 73.7 from 74.7 last month. The preliminary May reading was 73.2.
Friday's data corroborates another reading on sentiment. The Bloomberg Consumer Comfort Index declined last week to its lowest level since November, falling to 33.3 in the period ended May 25 from 34.1 the prior week, as Americans' views of their finances and the buying climate weakened.
The Conference Board's confidence index, meanwhile, rose in May to the second-highest level since 2008, reaching 83 from 81.7 a month earlier, the New York-based private research group said May 27.
Gas prices may be weighing on households. A gallon of unleaded gas at the pump cost $3.66 on May 29, down from a recent high of $3.70 in April yet up from the $3.49 average so far this year, based on data from motoring group AAA.
Gains in the job market may be helping consumers to feel more secure, however. Payrolls climbed by 288,000 workers in April after a 203,000 increase the previous month, the Labor Department said earlier this month. The unemployment rate fell to 6.3 percent, the lowest since 2008, from 6.7 percent in March.
Greater confidence could lead to stronger consumer spending and spur demand for new homes, boosting the housing market, which has slowed in early 2014.
Sentiment is one thing Douglas Yearley, chief executive officer at Horsham, Pa.-based luxury-home builder Toll Brothers Inc., is monitoring.
"Job growth, unemployment rates, macroeconomic issues, consumer confidence — all of that has a ways to go," Yearley said in a May 28 earnings call. "We have a ways to go until there is enough confidence out there for more and more people to come out to buy."
Wage gains have been slow to materialize, and may be needed to help galvanize consumer activity. Income growth slowed to 0.3 percent in April from 0.5 percent the prior month and consumer spending declined for the first time in a year, a report today showed.
Better consumer spending could help the economy to expand in the second quarter, after it contracted for the first time since 2011 in the first. Gross domestic product fell at a 1 percent annualized rate, a bigger decline than first estimated, the Commerce Department said Thursday in Washington.
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