Americans are displaying increased optimism regarding the economy and job market compared to recent months.
A report released Tuesday indicates that the U.S. consumer confidence index, a vital measure for predicting recessions, rose in May following a five-month decline. However, the figures suggest that a potential recession remains a possibility.
The Conference Board reported a surge of over 12 points in its consumer confidence index this month, recovering from a five-year low in April. The expectations index, which reflects Americans’ near-term perspectives on market conditions, also experienced a significant increase, though it remained below the critical threshold of 80, which signals a possible recession.
Here’s what you need to know about the uptick in consumer confidence.
Why did consumer confidence improve?
The agreement between the U.S. and China earlier in May to substantially lower tariffs on each other’s goods for a 90-day period appears to have alleviated consumer worries about the economy.
“The rebound was already visible before the May 12 US-China trade deal but gained momentum afterwards,” said Stephanie Guichard, the Conference Board’s senior economist for global indicators.
According to Tuesday’s report, tariffs remain a primary concern for many consumers, with some expressing worries about rising prices. Several major retailers have reversed their commitment to avoid raising prices for consumers after reporting declines in their first-quarter earnings.
On May 12, the Trump Administration announced that the U.S. and China would each reduce their tariffs on the other country by 115% for the 90-day period. This would reduce U.S. tariffs on Chinese goods to 30% and Chinese tariffs on American exports to 10%. This agreement was the second major step back from Trump’s tariffs, following a previous pause on broad tariffs against most countries in April. Allies and other trading partners are working to ease some delayed import taxes as negotiations with the European Union continue ahead of a July 9 deadline.
Despite ongoing concerns about the potential effects of tariffs, some consumers expressed hope regarding potential trade deals. Overall consumer confidence increased across all age groups, income levels, and political affiliations.
What concerns remain?
Economic sentiment among consumers across all age and income groups remains lower than it was six months ago, and the expectations index remains below the key recession indicator level after previous declines.
While the report indicated a rise in consumer sentiment concerning various aspects of the economy, from the current situation to short-term employment and future income prospects, expectations for job availability also weakened for the fifth consecutive month.
The U.S. unemployment rate is currently at 4.2%, consistent with its average over the past year, according to the U.S. Department of Labor’s latest .
