www.CUNA.org/newsnow  NEW YORK (5/30/12)  Credit Union National Association (CUNA) Chief Economist Bill Hampel provided the analysis for Fox Business News about yesterday's consumer confidence report, which unexpectedly dropped in May to its lowest level in four months.
 
"Consumer confidence rose sharply in February and is holding gains or giving back half its gains, but if one looks at the stresses consumers respond to, such as what's going on internationally, the energy prices and stock market, it's not surprising that they're getting iffy about their confidence," Hampel told Fox News Tuesday.  "However, in the next few months, the fundamentals they face are going to continue to improve and we'll see a return in consumer confidence," he said in a segment entitled, "CUNA Economist Expects Consumer Confidence to Rise."
 
"Consumer confidence is the result of all the other consumer fundamentals.  There is nothing looking fantastic now, but most of the other fundamentals are gradually improving."  He noted "the debt ratio that we got hooked on a few years ago is going down nicely for the past few years so consumers are able to borrow, employment gains are seeing substantial job growth -- not fantastic but they are coming back -- and consumers have built quite a bit of backlogs in demand.
 
"Despite all the stresses and strains, the housing sector, which does account for about two-thirds of spending in the U.S. economy, is chugging along nicely," he said.
 
Hampel noted two factors -- lower gas prices, and increasing house prices -- are moving in positive directions.
 
"Lower gas prices tend to improve sentiment especially among the bottom half of income distribution, the folks for which gas purchases are a more significant portion of their income, and they spend an awful lot of their income," he said.
 
Housing prices are moderately moving in the opposite direction, and their decline looks like it might be ending, he said.  "Seventy percent own their own homes and any improvement in home prices will help," Hampel noted.  (See the video if his outlook).
 
For a third consecutive month, the Consumer Board's Consumer Confidence Index declined in May, decreasing to 64.9 from 68.7 in April.  The drop was attributed to more citizens turning more negative about job prospects (Bloomberg.com, MarketWatch and Moody's Economy.com May 29).  Economists had forecast a May reading of 69.6, according to Bloomberg News survey.
 
The lowest payroll gains in six months may engender worries that economic growth is not moving fast enough to lessen the unemployment rate and spark consumer spending, Bloomberg said.  Consumers were less confident about the short-term economic outlook and not as upbeat about current labor-market and business conditions, Lynn Franco, director of economic indicators at the Conference Board, told MarketWatch.