Apparently, throwing trillions of dollars at a population that was locked down at home has some influence on how good the economy can be again. The Conference Board has reported that its Consumer Confidence Index managed to hold steady in May after a major decline in April.

The Consumer Confidence Index rose to 86.6 in May from 85.7 last month. Dow Jones (Wall Street Journal) had expected a reading of just 82.3.

Despite an improvement, and despite the numbers being less cautious in general, the report is still historically weak compared to recent years. March’s reading above 100 had been indicative of a trend of very strong reports going back to just before 2017.

The monthly survey’s cutoff date for the preliminary results was May 14. Readings above 100 generally are deemed positive and numbers under 100 are negative.

Inside the May report, the Present Situation Index fell to 71.1 from 73.0 a month earlier. This indicates that consumer assessment of current business and labor market conditions remains weak. The Expectations Index measures the coming months’ outlook for income, business and labor market conditions, and this portion of the report rose to 96.9 in May from 94.3 in April.

The report gave a mixed view of job expectations, despite the current record unemployment. It said:

The percentage of consumers claiming business conditions are “good” decreased from 19.9 percent to 16.3 percent, while those claiming business conditions are “bad” increased from 45.3 percent to 52.1 percent. Consumers’ appraisal of the job market was mixed. The percentage of consumers saying jobs are “plentiful” decreased from 18.8 percent to 17.4 percent, however those claiming jobs are “hard to get” decreased from 34.5 percent to 27.8 percent.

As noted in the expectations, consumers were moderately more optimistic about the short-term outlook of the economy. Those who are now expecting business conditions to improve over the coming six months rose to 43.3% from 39.8%, and those who are expecting business conditions to worsen fell to just 21.4% from 25.1% the previous month.

The outlook for labor markets was mixed in May. Consumers who expect jobs to be more plentiful in the months ahead fell to 39.3% from 41.2%, but those expecting fewer jobs also fell to 20.2% from 21.2%.

Consumers do remain somewhat concerned about their own short-term income prospects. The Conference Board reported that the percentage of consumers expecting an increase fell to just 14.0% from 17.2% the prior month. The proportion expecting a decrease fell to 15.0% form 18.4%.

One interesting aspect of the views was that consumers’ inflation expectations continued to climb in May. The Conference Board suggests that this view could lead to a sense of diminished purchasing power and that it could curtail spending.

While there are many negative undercurrents in the economy at this time, this should be viewed as a halt in the rate of negativity. Lynn Franco, Senior Director of Economic Indicators at The Conference Board, said of May:

Following two months of rapid decline, the free-fall in Confidence stopped in May. The severe and widespread impact of COVID-19 has been mostly reflected in the Present Situation Index. … Short-term expectations moderately increased as the gradual re-opening of the economy helped improve consumers’ spirits. However, consumers remain concerned about their financial prospects. … While the decline in confidence appears to have stopped for the moment, the uneven path to recovery and potential second wave are likely to keep a cloud of uncertainty hanging over consumers’ heads.

Stocks were already substantially higher on Tuesday upon the return from a three-day weekend for Memorial Day. What is harder to explain than any single-day stock market move is the massive recovery that has been seen since the panic-selling lows of March. On last look, the S&P 500 was now only down 11% from its all-time high and was down 7% year to date. The Nasdaq was only down 4% from its all-time high, but on last look it was up by 5% so far in 2020. The Dow Jones industrials may still be down 15% from highs seen in February, but the average is now down only 12% year to date.

At the peak of the stock market selling, the Dow was down 39% from its high and the S&P 500 was down almost 35% from its high. There may still be a sharp recession, but it’s getting harder and harder for market pundits to keep calling this a bear market.

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