CB Consumer Confidence Index Hits 98
Jumps 12.3 Points from Previous Month... Largest Increase in Four Years
Consumer sentiment among Americans has improved sharply this month. This appears to be a result of eased concerns over the tariff war, which had escalated into a game of chicken, after the United States and China each lowered their tariff rates by 115 percentage points as part of their first trade agreement.
On the 27th (local time), the Conference Board (CB) announced that the Consumer Confidence Index for May recorded 98. The CB Consumer Confidence Index had fallen to 85.7 last month, its lowest level in about five years, but surged by 12.3 points this month, marking the largest increase in four years. It also far exceeded the market forecast of 87.1.
A sharp rise in the consumer expectations index for the next six months drove the increase in the Consumer Confidence Index. The Consumer Expectations Index for May soared to 72.8, up 17.4 points from 55.4 in April. This was the largest increase in 14 years since 2011. However, it still remained below the benchmark of 80, which signals the possibility of a recession. The Present Situation Index rose by 4.8 points from the previous month to 135.9.
This improvement in consumer sentiment is analyzed as reflecting optimism about subsequent trade negotiations, following the decision by the US and China to significantly lower tariffs in their first trade agreement. Half of the survey responses included in this report were collected after the two countries reached the trade agreement on the 12th. Stephanie Gishard, Chief Economist at CB, explained, "The rebound in the Consumer Confidence Index was already becoming apparent even before the US-China trade negotiations on May 12, but it gained further momentum after the negotiations."
Assessments of the labor market and stock market also improved. 19.2% of consumers expected more jobs to be available in six months, up from 13.9% in April. The proportion of consumers expecting fewer jobs fell from 32.4% in April to 26.6% in May. The percentage of consumers expecting stock prices to rise in the next 12 months increased by 6.4 percentage points, from 37.6% in April to 44% in May.
Stephen Stanley, Chief Economist at Santander US Capital Markets, analyzed, "As seen in the recent threat of a 50% tariff on the European Union over the past few days, the tariff issue is not over yet, but it seems that financial markets are ready to move beyond it." He added, "Today's figures also suggest that households are moving in this direction."
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