CB Consumer Confidence Jumps To 98.0; U.S. Dollar Tests Session Highs

The Conference Board's Consumer Confidence Index rose to 98.0 in May from 86.0 in April, exceeding the consensus forecast of 87. The Present Situation Index and Expectations Index both increased, with the Expectations Index rising to 72.8, although still below the 80 level that typically signals a recession. The report indicated that improved consumer confidence was broad-based and preceded the U.S.-China trade deal, with the stock market rally providing further support; in response, the U.S. Dollar Index tested session highs, while gold and SP500 reacted negatively and positively, respectively.

Analysis

The May CB Consumer Confidence report indicated a significant improvement, with the headline index rising to 98.0 from April's 86.0, substantially exceeding the 87.0 forecast. This uplift was driven by increases in both the Present Situation Index, which climbed to 135.9 from 131.1, and the Expectations Index, which surged to 72.8 from 55.4. Despite this marked improvement in expectations, the index remains below the 80 level, a threshold historically associated with impending recessions. The Conference Board noted that this confidence rebound, evident across all age and income demographics, commenced prior to the U.S.-China trade deal announcement, though the deal and the concurrent stock market recovery provided further momentum. Concurrently, consumer expectations for future interest rates were stable, while 12-month inflation expectations moderated to 6.5% from 7.0% in April. The market reacted with the U.S. Dollar Index appreciating towards 99.50, gold prices declining towards $3290, and the S&P 500 rallying above 5880, reflecting the overall positive sentiment of the report.

Key Decisions for Investors

• The surge in consumer confidence, particularly the Present Situation Index, supports a constructive near-term outlook for U.S. equities, but investors should closely monitor if the Expectations Index can sustainably rise above the 80 recessionary warning level.
• Factor in the U.S. Dollar Index strength, which could pressure gold prices further and impact earnings for U.S. multinationals with significant overseas revenues.
• The observed decrease in 12-month inflation expectations to 6.5% may temper concerns about aggressive monetary tightening, potentially benefiting fixed-income assets if the trend continues.