Consumer confidence in the U.S. strengthens in May, halting a five-month decline.
U.S. Consumer Confidence Surges in May Amid Tariff Uncertainty Ease
The U.S. economy witnessed a surge in consumer confidence in May, marking a halt to five consecutive months of deterioration. The uptrend can be attributed to the temporary reprieve in the ongoing tariff conflict between the U.S. and China, as indicated by Pacer ETFs Distributors President Sean O'Hara during an appearance on Mornings with Maria.
The Conference Board, a global research organization, reported that its Consumer Confidence Index rose by 12.3 points to 98 in May, considerably surpassing the projected moderate increase to 87, as per Reuters-polled economists. близоximately half of the survey responses were gathered post-May 12, when the U.S. and China agreed on a deal to lower tariffs on Chinese imports from 145% to 30%, for a 90-day period. In turn, China pledged to cut its tariffs from 125% to 20%.
Stephanie Guichard, Senior Economist, Global Indicators at the Conference Board, commented, "The rebound was already visible before the May 12 U.S.-China trade deal but gained momentum afterwards." She acknowledged that consumer expectations were primary drivers of the monthly improvement, as all three components of the Expectations Index – business conditions, employment prospects, and future income – rose from their April lows.
While consumer optimism improved, concerns about tariffs and their impact on prices persisted. Gas prices, however, reached a four-year low ahead of the Memorial Day weekend, which could positively influence consumers' spending habits.
The Conference Board's report highlighted the rebound in consumer confidence across all age groups, income levels, and political affiliations. Despite this progress, ongoing apprehensions about business conditions and job availability remain a concern.
Inflation expectations also saw a drop, with the average inflation expectations over 12-months dipping to 6.5% from April's 7%. Moreover, the report revealed that more than a third of consumers are setting money aside for future spending, while around a quarter are tapping into their savings for current expenses and postponing major purchases.
In conclusion, the recent tariff negotiations between the U.S. and China have boosted U.S. consumer confidence, albeit temporarily. Economists emphasize that further policy decisions or unpredictable price shocks could impact public sentiment regarding the economy.
Reuters contributed to this report.
- The surge in consumer confidence in May, as indicated by the rise in The Conference Board's Consumer Confidence Index, may positively influence the U.S. economy, particularly in the finance and business sectors.
- Inflation expectations have decreased, with the average inflation expectations over 12-months dropping from April's 7% to 6.5%, although concerns about tariffs and their impact on prices persist.
- Amid the recent improvement in consumer confidence, many Americans are actively saving for future spending, according to the Conference Board's report, which could lead to increased savings in the markets.
