Consumer Confidence for the month of May showed a rebound from April, rising from 94.3 up to 95.4, which was above consensus expectations for a level of 95.0. This represents the fifth straight month and longest streak since 2007 where sentiment has been above its historical average of 93.4.
While sentiment improved this month it wasn’t felt equally across all income levels. Over the years, we have made repeated mentions about the fact that sentiment has improved at a much faster rate among higher income consumers than lower income consumers. In this month’s report, we saw the opposite. For consumers with incomes above 35K, confidence levels declined by about 5%, but for consumers with incomes between $15K and $35K, sentiment levels spiked by more than 17% to new post-recession highs. One month does not make a trend, but it bears watching as lower income consumers have been largely left out of the current expansion.
Whenever we discuss income levels and how they pertain to Consumer Confidence we usually focus on upper income (+$50K) and middle class ($35-$50K) consumers. The chart below shows historical readings for both income cohorts going back to 1987. While the two tracked each other very closely in the past, during the current recovery sentiment has clearly rebounded faster among wealthier consumers.
The chart below shows the six-month average gap between consumer confidence levels of consumers with incomes above $50K and between $35K and $50K. As of this month, the six-month average gap stands at 32.1 percentage points, which represents the widest gap in the history of the index. While this month’s Consumer Confidence report showed some improvement in sentiment among consumers with the lowest incomes, the chart below illustrates that there is still quite a gap yet to fill.