That resonates with that huge rebound in the US Conference Board’s Consumer Confidence Index in May. It leapt to 98.0, an increase over a revised January figure of 86.0, originally reported as 85.7. This jump is the first indication that the mood of consumers is turning. Consumers are feeling more upbeat about their current business conditions and their overall economic outlook.
That brightening is most clearly seen in the Present Situation Index, which jumped 4.8 points to 135.9. At the same time, Expectations Index gained more than enough ground in May, rising 17.4 points to 72.8. Most importantly, though, it’s important to remember that the Expectations Index is still well under the 80-point level. This level typically serves as a harbinger of an imminent recession.
Consumers noted a much-improved assessment of current business conditions than last month. Their measure of labor market conditions has deteriorated for the fifth month in a row. This trend points to severe and continuing weakness in labor market.
The backtrack consumer optimistic was most striking after the US-China trade agreement on May 12 representative. In looking at the change, Stephanie Guichard, Senior Economist at The Conference Board, had this to say about the state of play,
“The rebound was already visible before the May 12 US-China trade deal but gained momentum afterwards. The monthly improvement was largely driven by consumer expectations as all three components of the Expectations Index—business conditions, employment prospects, and future income—rose from their April lows. Consumers were less pessimistic about business conditions and job availability over the next six months and regained optimism about future income prospects. Consumers’ assessments of the present situation also improved. However, while consumers were more positive about current business conditions than last month, their appraisal of current job availability weakened for the fifth consecutive month.”
This uptick in consumer confidence indicates that households are beginning to feel more stable. An improvement likely to drive more spending in the months ahead. Consumers appeared less pessimistic regarding business conditions and job availability over the next six months, indicating a shift toward a more hopeful outlook for economic recovery.
Perhaps most importantly, the Expectations Index improved greatly on all three components. Business conditions, employment prospects, future income came roaring back from their April trough. Consumer expectations gained sharply in May. The continuation of this upward trend was key in reinvigorating overall consumer confidence.
Strengthening consumer sentiment is helping to shore up confidence across the financial markets. At the same time, US Dollar Index (DXY) remains solid above the 99.40 area, a sign of this stability.