Consumer sentiment jumps after U.S.-China trade truce
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Americans upgraded their view on the economy for the first time in five months, helped by the Trump administration's agreement to ease tariffs on China, the Conference Board said on Tuesday.
Why it matters: The data shows how closely consumers tie their economic confidence to Trump's trade war, with concerns about personal finances, inflation and employment prospects receding when tariff tensions appear to be cooling.
What they're saying: "The rebound was already visible before the May 12 US-China trade deal but gained momentum afterwards," Stephanie Guichard, a senior economist at the Conference Board, a nonprofit group, said in a release.
- "[C]onsumers 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," Guichard added.
Details: The Conference Board's consumer confidence index rose more than 12 points in May, with improvements among all demographic groups and political affiliations — though the strongest improvement was among Republicans.
- Consumers had a more optimistic outlook on business conditions, the labor market and future income, while the share of consumers expecting a recession declined.
- Consumer inflation expectations for the year ahead fell a half-percentage point to 6.5%.
What to watch: The Conference Board said about half its responses were collected before Trump announced that the U.S. would slash tariffs on Chinese imports to 30% from 145% for the next 90 days.
- The survey ended before Trump's latest threat of 50% tariffs on European imports, which was later pushed off — a sign of the on-again, off-again trade tensions.
The intrigue: The volatility has spilled over into the economic data, where it has been difficult to get a read on how tariffs are weighing on demand.
- There was a historic rush to stockpile goods earlier this year before tariffs took effect. Now that is rapidly unwinding.
- For instance, factory orders plunged by more than 6% in April after a near-8% surge the prior month, as businesses ordered ahead to avoid tariffs, the Commerce Department said on Tuesday.
- Non-defense capital goods orders — which includes machinery, construction equipment and more — fell 19% in April, one of the biggest drops in percentage terms since the pandemic.
- That followed a 27% surge in March, one of the largest monthly increases ever.
