US May Consumer Confidence Dips Slightly; Inflation Concerns Remain Elevated

Overview

This research report, released by the Goldman Sachs Macro team, focuses on interpreting the May 2026 Conference Board Consumer Confidence Index data for the United States. The core conclusion is: although the confidence index declined slightly month-over-month to 93.1, the drop was smaller than market expectations and was primarily dragged down by the 'Present Situation' component, while the 'Expectations' component actually rebounded. Meanwhile, consumers' inflation expectations for the next 12 months remained at a high level of 6.2%, reflecting continued concerns about oil price hikes and inflationary pressures triggered by geopolitical factors such as the war in the Middle East.

Core views

Data Performance Better Than Pessimistic Expectations: The May Consumer Confidence Index fell from the revised April figure of 93.8 to 93.1, a decrease of 0.7 points. This result was better than Goldman Sachs' forecast of 91.5 and the market consensus expectation of 92.0. Although the overall index declined, the structure showed divergence: the 'Present Situation Index,' reflecting current economic perceptions, fell sharply by 3.2 points to 121.2, while the 'Expectations Index,' reflecting future views, rose counter-trend by 1.0 point to 74.4. Labor Market Perceptions Adjusted Slightly: The 'Labor Differential' (the percentage difference between those who believe jobs are plentiful and those who believe jobs are hard to get), an important component of the confidence index, dipped slightly from 7.5 in April to 6.9. Specifically, the proportion of respondents believing jobs are plentiful fell by 1.4 percentage points to 25.5%, while the proportion believing jobs are hard to get fell by 0.8 percentage points to 18.6%. This indicates that the tightness of the labor market has eased slightly in consumer perceptions but remains relatively robust. Inflation and Geopolitical Concerns Solidified: Survey data shows that consumers' inflation expectations for the next 12 months remained at 6.2%, flat compared to the revised April level, and hitting the highest level since May 2025. The Conference Board noted that consumers continued to show a pessimistic tendency in open-ended responses, with the frequency of mentions of 'prices' and 'oil and gas' increasing for the second consecutive month, while mentions of 'war,' 'geopolitics,' and 'conflict' remained high. This suggests deep consumer concerns about the inflationary impact of the Middle East war on their wallets. However, the report also noted that consumers hold modest expectations for improvement in the business environment and labor market six months out.

Analysis framework

The report adopts a typical macro data decomposition analysis method. First, it compares the headline data (overall confidence index) with market expectations and previous values to determine the direction of the data 'surprise' (beat/miss). Second, it deeply decomposes the internal structure of the index, distinguishing between the 'Present Situation' and 'Expectations' sub-items to identify whether the driver of confidence changes stems from current pain or future hope. Third, it combines the 'Labor Differential,' a high-frequency proxy indicator, to cross-verify the real feel of the labor market. Finally, through qualitative analysis of consumers' open-ended text feedback (write-in responses), it extracts keywords (such as oil prices, war) to combine quantitative data with qualitative sentiment, explaining the structural reasons for persistently high inflation expectations.

Methodology notes

• Macroeconomic framework

  Consumer Confidence Index Structural Decomposition

  Decomposes the Consumer Confidence Index into 'Present Situation' and 'Expectations' components. The present situation reflects current income and employment feelings, while expectations reflect views on the next six months to one year. Divergence between the two usually implies the economy is at a turning point or affected by short-term shocks.

• Macroeconomic framework

  Labor Differential

  Calculated as the proportion of those who believe 'jobs are plentiful' minus the proportion of those who believe 'jobs are hard to get.' This indicator is a sensitive gauge of labor market tightness; an expanding differential usually corresponds to a strong job market, while a contracting one signals cooling.

Key data

• May Consumer Confidence Index93.1Down 0.7 points from the revised April value of 93.8, above the expected 92.0
• Present Situation Index121.2Down 3.2 points from the revised April value of 124.4
• Expectations Index74.4Up 1.0 point from the revised April value of 73.4
• Labor Differential6.9Down 0.6 points from the previous value
• 12-Month Inflation Expectations6.2%Flat compared to April, highest since May 2025

Impact & implications

The report believes that although the confidence index declined overall, given that the drop was smaller than expected and the expectations component warmed up, there was no cliff-like deterioration. However, inflation expectations stubbornly remained at a high level of 6.2%, and consumers attributed this to geopolitics and energy prices, which may pose greater challenges for the Federal Reserve in controlling inflation expectations. If consumers curb spending due to fears of war-induced inflation, it could suppress subsequent consumption growth.

Risks

• Escalation of the Middle East war and geopolitical conflicts leading to further soaring oil prices
• Consumer inflation expectations becoming unanchored, triggering a wage-price spiral
• Unexpected rapid cooling of the labor market, leading to a further sharp decline in the Present Situation Index

What to watch

• Changes in the frequency of consumers mentioning 'oil prices' and 'war' in subsequent months
• Whether expectations for the business environment and labor market six months out materialize as improvements
• Whether actual inflation data diverges further from consumer expectations