Consumer confidence rose in May despite rising trade tensions between the Trump administration and China and declines in retail and home sales.
The Conference Board consumer confidence index rose to 134.1 in May from 129.2 in April, its highest level since the end of 2018. The monthly report from the business research group is closely watched by investors and economists as an influential gauge of consumer confidence.
The overall confidence index is now close to its highest level in almost 18 years, the Conference Board said Tuesday.
The Conference Board’s present situation index, which measures consumers’ views of the current state of the economy, jumped from 169 in April to 175.2 in May. The group’s expectations index, a gauge of confidence in the future economic growth, also rose from 102.7 to 106.6.
The rise in consumer confidence comes after a month of mixed economic news and the emergence of potential threats to the U.S. and global economies.
“Consumer Confidence posted another gain in May and is now back to levels seen last Fall when the Index was hovering near 18-year highs,” said Lynn Franco, senior director of economic indicators at the Conference Board.
“Consumers expect the economy to continue growing at a solid pace in the short-term, and despite weak retail sales in April, these high levels of confidence suggest no significant pullback in consumer spending in the months ahead.”
Economic data released in May lowered some expectations of consumer confidence. Retail sales dropped 0.2 percent in April while home sales sunk 6.9 percent, according to federal data.
But the economy blew past expectations by adding 263,000 jobs in April, which Franco cited as the main driver behind the rise in consumer confidence.
“The increase in the Present Situation Index was driven primarily by employment gains. Expectations regarding the short-term outlook for business conditions and employment improved, but consumers’ sentiment regarding their income prospects was mixed,” Franco said.
Consumer income and the broader economy could soon be hindered by the new tariffs on Chinese goods. The cutoff for the Conference Board survey was May 16, a week after Trump and the Chinese government escalated their nearly yearlong trade war.
Trump on May 9 hiked tariffs on $200 billion in Chinese goods from 10 to 25 percent. Beijing responded by raising import taxes on $60 billion in U.S. agricultural exports.
The White House also released on May 13 a list of $300 billion in Chinese goods that Trump may subject to a 25 percent tariff. If Trump follows through, the president would impose tariffs on almost all goods of the roughly $535 billion in goods imported from China to the U.S.
The new tariffs would likely raise prices on hundreds of food items, agricultural products, articles of clothing, shoes and other consumer goods imported from China, which could tighten household budgets and weigh on consumer confidence.
Treasury Secretary Steven MnuchinSteven Terner MnuchinThe Hill’s Morning Report — After contentious week, Trump heads for Japan Artist designs stamp to put Harriet Tubman’s face over Jackson’s on bills On The Money: Senate passes disaster aid bill after deal with Trump | Trump to offer B aid package for farmers | House votes to boost retirement savings | Study says new tariffs to double costs for consumers MORE said at a House hearing Wednesday that he has spoken with major retailers, including the chief financial officer of Walmart, about potential tariff exemptions for goods not readily available from places other than China.
“There may be a small number of items where the cost of the tariffs may be passed on and those are the things that would be subject to exceptions,” Mnuchin told the House Financial Services Committee.