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Consumer Confidence in May 2025: Surge Fueled by Trade Deal Optimism

Consumer Confidence in May 2025: Surge Fueled by Trade Deal Optimism

In May 2025, U.S. consumer confidence rebounded sharply, with the Conference Board’s Consumer Confidence Index® jumping 12.3 points to 98.0, exceeding expectations and marking the largest monthly gain in four years. Driven by optimism over a U.S.-China trade truce and delayed EU tariffs, this surge ended a five-month decline, signaling potential for increased spending and economic growth. This article analyzes the drivers, implications, and risks of this development.

Key Drivers of the Surge

  1. U.S.-China Trade Truce (May 12, 2025):
    • President Trump reduced tariffs on Chinese imports from 145% to 30% for 90 days, easing trade war tensions.
    • The rebound gained momentum post-truce, with expectations for business, employment, and income rising.
  2. Broader Trade Optimism:
    • The EU’s willingness to fast-track trade talks led Trump to delay 50% tariffs until July 9, boosting global trade hopes.
    • Confidence improved across demographics, with Republicans showing the strongest gains.
  3. Economic Indicators:
    • Present Situation Index rose 4.8 points to 135.9.
    • Expectations Index surged to 72.8 from 54.4.
    • Inflation expectations fell to 6.5%.

Context: Rebound from Lows

  • April 2025: Confidence fell to 86.0, a five-year low, with expectations at 54.4.
  • March 2025: Future expectations hit a 12-year low (65.2).
  • Michigan Survey (May 16): Sentiment dropped to 50.8, reflecting pre-truce tariff fears.

Implications

  • Spending: Improved income and job outlooks may boost discretionary purchases.
  • Markets: Retail stocks rallied, with bullish signals for $XRT and $SPY.
  • Growth: Supports 1.7% GDP growth forecast.
  • Risks: Unresolved trade deals and demographic splits could derail gains.

Public and Expert Sentiment

  • X: Users like @Conferenceboard and @patelshrey01 celebrated the surge, noting bullish retail prospects.
  • Experts: Robert Frick praised tariff rollbacks, while Elizabeth Renter urged clear trade communication.

Conclusion

The May 2025 confidence surge to 98.0 reflects trade deal optimism, with potential for economic growth. However, unresolved trade risks and demographic disparities warrant caution. Monitor The Conference Board (https://www.conference-board.org) for updates.