Critical Shifts:
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Present vs. Future Divergence (Floor Traffic Slump): The Present Situation Index dropped by 3.2 points to 121.2, showing that immediate consumer willingness to spend is pulling back due to Middle East inflation pressures. Dealers should brace for slower floor traffic and longer sales cycles right now, even if consumers feel slightly better about the economy six months down the road.
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Income Hesitation Demands Creative Financing: Expected household income turned less positive in May, with more consumers anticipating a drop in income. With buyers feeling squeezed, independent dealers will need to emphasize aggressive financing options, subprime flexibility, and value-focused inventory to close deals.
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Target High-Income and Mid-Aged Buyers: Demographics are shifting—confidence actually ticked up for consumers aged 35–54 and higher-income brackets. Dealership marketing and inventory sourcing should lean heavily into premium vehicles, family SUVs, and late-model units targeted at these more resilient, well-off buyer segments.
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The Conference Board Consumer Confidence Index dipped 0.7 points to 93.1 (1985=100) in May, down from an upwardly revised 93.8 in April. The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – retreated by 3.2 points to 121.2. The Expectations Index – based on consumers’ short-term outlook for income, business, and labor market conditions – rose by 1.0 points to 74.4. The survey period for this month’s preliminary results was May 1–19, encompassing the ongoing war in the Middle East that is placing upward pressure on prices globally.
“Consumer confidence edged downward in May as the inflationary impacts of the war in the Middle East intensified,” said Dana M Peterson, Chief Economist, The Conference Board. “Consumer appraisals of current business conditions and the current labor market were moderately less positive compared to last month. This was somewhat offset by modest improvements in consumers’ expectations for business conditions and the labor market six months from now. Meanwhile, income expectations eased in May, as those anticipating less income rose.”
The Present Situation Index cooled again in May, as net views of current business conditions – the share saying conditions are “good” versus “bad” – fell by 2.8 ppts to +1.4%. Perceptions of employment conditions declined slightly, with the labor market differential – the share of consumers saying jobs are “plentiful” minus the share saying jobs are “hard to get” – ticking down by 0.6 ppts to +6.9%.
The Expectations Index increased by 1.0 point in May, with two of its three components – net expectations for business and labor market conditions six months from now – inched up. Expected household income was slightly less positive.
Among age groups, confidence ticked up for consumers aged 35-54, but trended downward for older and younger consumers, both month-over-month and on a six-month moving average basis. By income, confidence among higher income groups trended upward on a six-month moving average basis. By generation, confidence improved for the Silent Generation (the oldest group) but was little changed or lower among other generations. By political affiliation, Republicans remained the most optimistic, while Independents were the only group that saw confidence tick up on a month-over-month basis.
