US consumer confidence rebounds after months of tariff anxiety

US consumer confidence rebounded in May, with the Conference Board's index rising 12.3 points to 98 after hitting a low of 85.7 in April, driven by improved short-term expectations for income, business conditions, and the job market. The rebound is attributed to a potential calming of nerves following Trump's tariff pullbacks, pauses, and trade negotiations, particularly with China and the UK, although concerns persist regarding job availability despite a strong jobs report.

Analysis

US consumer confidence experienced a significant rebound in May, with the Conference Board's index increasing by 12.3 points to 98, recovering from April's 85.7, which was the lowest reading since May 2020. This improvement was largely attributed to a substantial 17.4 point jump in the short-term expectations sub-index for income, business conditions, and the job market to 72.8. The easing of anxieties appears linked to recent developments in US trade policy, particularly President Trump's tariff pullbacks, negotiation pauses with key trading partners like China (following an initial 145% tariff threat and a subsequent 90-day pause), an agreement with the UK, and a temporary hold on proposed 50% tariffs on EU imports until July 9. While the proportion of consumers anticipating a US recession in the next 12 months declined, the expectations index remains below the 80-point threshold, a level historically associated with potential recessionary pressures. A notable divergence persists: despite a strong April jobs report indicating the addition of 177,000 jobs and an unemployment rate of 4.2%, consumers' assessment of job availability weakened for the fifth consecutive month, suggesting underlying caution.

Key Decisions for Investors

• Investors should closely monitor developments in US trade policy and tariff negotiations, as these remain pivotal to consumer sentiment and the broader economic outlook.
• Consider the current rebound in confidence as potentially fragile, given that the expectations sub-index remains below levels that typically signal robust expansion and that significant trade uncertainties persist.
• Scrutinize the divergence between strong official labor market statistics and weakening consumer perception of job availability, as this discrepancy could signal future shifts in consumer spending or indicate underlying labor market nuances not captured by headline figures.