U.S. consumer confidence rose in May after five straight months of deterioration after a pause in higher tariff rates between the U.S. and China boosted optimism, though concerns about tariffs raising prices and hurting the economy remained.
The Conference Board reported on Tuesday that its consumer confidence index rose by 12.3 points to 98 in May, well above the modest rise to 87 that was projected by economists polled by Reuters.
Roughly half of the consumer confidence survey’s responses were collected after May 12, when the Trump administration reached a deal to lower tariffs on Chinese imports from 145% to 30% for a 90-day period, in exchange for China reducing its tariffs from 125% to 20%.
“The rebound was already visible before the May 12 U.S.-China trade deal but gained momentum afterwards,” said Stephanie Guichard, senior economist, global indicators at the Conference Board. “The monthly improvement was largely driven by consumer expectations as all three components of the Expectations Index – business conditions, employment prospects, and future income – rose from their April lows.”
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“Consumers were less pessimistic about business conditions and job availability over the next six months and regained optimism about future income prospects. Consumers’ assessments of the present situation also improved,” Guichard said.
However, she added that “while consumers were more positive about current business conditions than last month, their appraisal of current job availability weakened for the fifth consecutive month.”
The Conference Board’s report found that the rebound in consumer confidence occurred across all age groups and income groups, as well as across political affiliations – though it noted that prior months’ declines meant the index’s six-month moving average was still down.
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Tariffs continued to feature prominently in the Conference Board’s write-in responses, which also included optimism about trade deals.
“Notably, consumers continued to express concerns about tariffs increasing prices and having negative impacts on the economy, but some also expressed hopes that the announced and future trade deals could support economic activity,” the report said.
“While inflation and high prices remained an important concern for consumers in May, there were also some mentions of easing inflation and lower gas prices,” it added.
The report showed that consumers’ average inflation expectations over 12-months dipped to 6.5% after spiking to 7% in April.
It also asked consumers a special question about whether they’ve changed their spending and financial behavior recently, with more than a third (36.7%) saying they put money aside for future spending. About a quarter of consumers said they tapped into savings to pay for goods and services (26.6%) and postponed major purchases (26%).
Reuters contributed to this report.
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