U.S. consumer confidence surged in May after five consecutive months of decline, buoyed by improving trade relations with China and growing economic optimism despite lingering inflation concerns.
At a Glance
- Consumer confidence index rose 12.3 points to 98 in May, exceeding economists’ projection of 87
- The May 12 U.S.-China trade deal, which reduced tariffs for a 90-day period, significantly boosted economic outlook
- The Expectations Index surged 17.4 points to 72.8, though still below the recession threshold of 80
- Confidence improved across all age groups, income brackets, and political affiliations, with Republicans showing the strongest gains
- Despite improved outlook, 26.6% of consumers report using savings for current expenses while 26% are postponing major purchases
Consumer Confidence Rebounds After Five-Month Slide
American consumers are showing renewed economic optimism following the May release of the Conference Board’s Consumer Confidence Index. The closely watched economic indicator jumped 12.3 points to reach 98, significantly surpassing economists’ projections of 87. This marks a decisive turnaround after five consecutive months of declining confidence. The Present Situation Index, which measures consumers’ assessment of current business and labor market conditions, increased 4.8 points to 135.9, while the Expectations Index soared 17.4 points to 72.8.
The improved outlook spans across demographic groups. Every age bracket, income level, and political affiliation reported increased confidence in May, with Republican consumers registering the most substantial gains.
However, the broader six-month moving average continues to show downward pressure, indicating that this rebound follows a period of sustained pessimism about economic conditions.
Trade Deal Catalyzes Economic Optimism
The May 12 trade agreement between the United States and China appears to have significantly influenced consumer sentiment. The deal established a 90-day reduction in tariffs between the world’s two largest economies, easing concerns about escalating trade tensions. According to Conference Board data, consumers’ outlook on business conditions, job availability, and future income all improved following the announcement, though appraisals of current job availability continued a five-month decline.
“The rebound was already visible before the May 12 U.S.-China trade deal but gained momentum afterwards,” said Stephanie Guichard.
Stock market performance also contributed to improving consumer sentiment. With markets showing recovery in May, the percentage of consumers expecting stock prices to increase over the next 12 months rose to 44%, up from 37.6% in April. Simultaneously, those anticipating stock price declines dropped from 47.2% to 37.7%. This shift in market outlook was particularly pronounced following the trade deal announcement.
Inflation Concerns and Consumer Behavior
Despite the positive trajectory in consumer confidence, inflation and high prices remain significant concerns for American households. There was some relief, however, as consumers’ average inflation expectations over the next 12 months decreased to 6.5% from 7% in April. Reports of easing inflation and lower gas prices contributed to a more optimistic financial outlook, with more consumers expressing positive views about both their current and future financial situations.
“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,” noted Stephanie Guichard.
The survey revealed important insights into how Americans are managing their finances in the current economic environment. When asked about financial behavior, 36.7% of consumers reported saving for future spending, while 26.6% indicated they were using savings to cover current expenses. Another 26% said they were postponing major purchases. These patterns varied significantly based on household income, highlighting the uneven impact of economic conditions across different segments of the population.
Future Economic Outlook
The May data shows cautious optimism about the economy’s direction. The share of consumers expecting a recession over the next 12 months declined, while purchasing plans for homes, automobiles, and vacations all increased. Similarly, consumers reported greater intentions to purchase big-ticket items and services. However, the Expectations Index remains below 80, which historically signals recession concerns despite its significant improvement.
Current survey data suggests that consumers remain more concerned about affordability than job security, indicating that while the labor market appears relatively stable, high prices continue to strain household budgets. The monthly Consumer Confidence Survey, conducted by The Conference Board and Toluna, provides critical insights into consumer attitudes and purchasing intentions, serving as a key barometer for economic conditions and potential future spending patterns.