US Consumer Confidence Surges 14.9% in May, Driven by Tariff Suspension

The Consumer Confidence Index for the United States surged to 98.0 in May, exceeding all economist predictions. This significant increase from the previous month's 85.7 was driven by a combination of factors, including the temporary suspension of tariffs and a general improvement in economic sentiment. The index, which measures consumer expectations for the short term, rose by 17.4 points to 72.8, while the current conditions index increased by 4.8 points to 135.9. This data, provided by the Conference Board, highlights a notable shift in consumer optimism, which is crucial for economic growth as consumer spending accounts for a substantial portion of the nation's GDP. The rise in consumer confidence suggests that Americans are feeling more secure about their financial situations and the overall economic outlook, which could translate into increased spending and investment. This positive trend is likely to influence policy decisions and economic forecasts, as policymakers and analysts closely monitor consumer sentiment as a key indicator of economic health. The data also reflects a broader sense of optimism, with consumers expressing greater confidence in both their current financial status and future economic prospects. This surge in confidence is particularly significant given the recent economic challenges and uncertainties, indicating a potential turning point in consumer behavior and economic activity.

This improvement in consumer confidence was evident across various demographic groups, with notable increases observed among different age groups, income levels, and political affiliations. The most significant rebound was seen among Republican consumers, although all groups showed some level of recovery. Despite this positive trend, the six-month moving average for consumer confidence across all groups has not yet returned to pre-pandemic levels, indicating that the recovery is still ongoing. The temporary suspension of tariffs on certain Chinese imports, announced on May 12, played a crucial role in boosting consumer confidence. This policy change not only alleviated concerns about rising prices but also fostered a more optimistic outlook on future economic conditions. The data shows that consumers are less pessimistic about the economic and employment outlook for the next six months and have regained confidence in income growth. Additionally, perceptions of the current economic situation have improved, particularly in terms of business conditions. However, concerns about the labor market persist, as the employment index has weakened for the fifth consecutive month, reflecting ongoing challenges in the job market.

The surge in consumer confidence has also translated into increased willingness to make significant purchases. Compared to April, there was a notable rise in plans for buying a home, purchasing a car, and vacationing. This trend was particularly pronounced in the survey samples collected after May 12. Additionally, there was a significant increase in plans to purchase high-value items such as household appliances and electronics. Consumers also showed a stronger inclination to spend on services, with dining out remaining the most popular choice, followed by streaming services. The largest increase in spending intentions was observed in categories such as movies, theaters, live entertainment, and sporting events. The survey also revealed that 36.7% of consumers are saving for future expenses, while 26.6% have used their savings to cover current expenses. A significant portion, 26%, have delayed major purchasing decisions. High-income households are more likely to save, while middle- and low-income households are more inclined to use their savings or postpone purchases. Only 19% of consumers reported advancing their spending to avoid future tariff impacts, with this figure rising to 26% among high-income households. When assessing future risks, consumers expressed greater concern about affording necessities or desired items compared to the fear of unemployment. Nearly half of the respondents were worried about being unable to afford essential goods or desired items, while only about a quarter were concerned about job loss.

In terms of specific data points, the proportion of consumers who rated business conditions as "good" increased to 21.9% in May, up from 19.2% in April. The percentage of those who rated conditions as "bad" decreased from 16.3% to 14%. The proportion of consumers who viewed job opportunities as "plentiful" slightly increased to 31.8%, while those who saw them as "hard to get" rose to 18.6%. Looking ahead to the next six months, 19.7% of consumers expected business conditions to improve, up from 15.9% in April. The percentage of those who anticipated a deterioration fell from 34.9% to 26.7%. The proportion of consumers who expected job opportunities to increase rose from 13.9% to 19.2%, while those who anticipated a decrease fell from 32.4% to 26.6%. Additionally, the percentage of consumers who expected their income to rise increased to 18%, while those who anticipated a decrease fell to 13.8%.