MIAMI — In contrast to last May, consumers are showing much more confidence in some key indicators, including their debt levels, employment opportunities, finances and credit scores. And that is translating into a greater likelihood that they will make some major purchases in the next six months.
The WalletHub Economic Index for May, which is based on 10 specific markers, jumped 22% year-over-year, putting consumer confidence at its highest level since December 2020.
“The 22% increase in consumer sentiment over the past year is an encouraging sign that our economy is recovering from the damage it suffered as a result of the pandemic and inflation,” said Cassandra Happe, WalletHub analyst. “People who have high financial confidence are likely to spend more money and reduce their debts, both of which are good for the economy as a whole.”
Financial optimism rose by 16% between April and May and by more than 8% in the past year, according to WalletHub’s index. Home-buying interest was another indicator that soared, rising by 31% over the past year, while the likelihood of making a large purchase within six months was 22% higher than last year.
Meagan McCollum, associate professor of finance and director of the real estate programs at the University of Tulsa and a WalletHub expert panelist, explained that consumer confidence levels are influenced by economic data and reports, and recently “those have trended in a positive direction. The stock market is hitting new highs, and inflation — while still elevated from where the Federal Reserve would like it to be — is sharply down while unemployment rates remain low.
“Although the economic news is not universally positive — for example, interest rates remain elevated, and many grocery items have increased in price faster than the overall inflation rate — there is enough in the ‘positive economic news’ column that consumers feel more confident in the economy than they did previously,” she said.
WalletHub conducts a monthly online survey for its index. There have been about 9,700 respondents between December 2020 and May 2024.