United States: Confidence resilience faces Iran and oil risks – TD Securities

TD Securities analysts highlight that United States (US) consumer confidence from the Conference Board slipped only marginally in May and continues to outperform other sentiment gauges. They note, however, that persistent conflict in Iran and elevated gasoline prices are likely to weigh on confidence ahead, with survey details showing weaker buying plans, a softer labour differential and respondents increasingly focused on prices, Oil and geopolitical risks.

Consumer sentiment diverges but may soften

"Consumer confidence continues its trend of upside surprises, declining only slightly to 93.1 in May from an upwardly revised 93.8 in April (TD: 90.5, cons: 92.0). The Conference Board's measure of consumer confidence has diverged in recent months from both UMich and Morning Consult. We believe that as the Iran conflict persists and gasoline prices remain high, consumer confidence is likely to eventually move lower."

"Consumers' assessment of the labor market in May continued back on its downtrend, with the labor differential declining to 6.9. This is in line with the declining job finding expectations in the NY Fed survey as well."

"Buying plans in the report moved lower while inflation expectations remained high. Despite the more modest decline in the headline, the Iran shock is being felt by consumers."

"According to the Conference Board, "Consumers’ write-in responses on factors affecting the economy continued to skew towards pessimism in May. References to prices and oil and gas increased in frequency for a second consecutive month, while mentions of war, geopolitics, and conflict remained elevated—likely signaling consumers’ underlying concerns about the inflationary impacts of the war in the Middle East on their wallets.""

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)