The Conference Board's consumer confidence index rose 12.3 points in May to 98.0, reversing the declines seen in March and April, largely driven by positive developments in US trade policy, including a three-month freeze on tariffs and mutual tariff reductions between the US and China. The improvement reflects reduced pessimism about the economy heading into a recession and higher inflation due to trade policies. However, the May sentiment reading contradicts the preliminary University of Michigan survey, which showed a 1.4-point decline to 50.8. This discrepancy may be due to the timing of the Michigan survey data collection, which likely occurred before the tariff deescalation announced on May 12. The Conference Board's index shows improvement in consumers' assessment of the current situation and expectations for employment prospects, income outlook, and business conditions. Consumers are also more likely to buy major appliances, houses, and cars in the next six months. Average one-year-ahead inflation expectations fell 0.5 percentage points to 6.5%. The report suggests that consumers view tariffs as stagflationary, linking their economic prospects to tariff developments.
