U.S. Consumer Confidence Rebounds Sharply in May Amid Easing Tariff Concerns

28 May 2025

Flickr Creative Commons Photo/Stephen Ausmus, USDA

After five consecutive months of decline, U.S. consumer confidence experienced a significant rebound in May 2025, reflecting renewed optimism among Americans regarding the economy. The Conference Board reported that its Consumer Confidence Index rose by 12.3 points to 98.0, up from April's 85.7, marking the most substantial monthly increase in four years.

This resurgence in confidence coincides with recent developments in international trade relations. Notably, President Donald Trump's administration announced a 90-day pause on certain tariffs imposed on Chinese imports and delayed the implementation of a 50% tariff on European Union goods. These moves have alleviated some of the economic uncertainties that had previously dampened consumer sentiment.

The Expectations Index, which gauges consumers' short-term outlook for income, business, and labor market conditions, surged by 17.4 points to 72.8. While this is a notable improvement, it remains below the threshold of 80, which typically signals a recession ahead. The Present Situation Index, assessing current business and labor market conditions, also saw an increase of 4.8 points, reaching 135.9.

Stephanie Guichard, Senior Economist at The Conference Board, noted that the rebound in consumer confidence was already evident before the May 12 U.S.-China trade deal but gained momentum afterward. She emphasized that the improvement was largely driven by enhanced consumer expectations across business conditions, employment prospects, and future income.

Despite the positive shift in consumer sentiment, concerns persist regarding job availability and inflation. The assessment of current job availability weakened for the fifth consecutive month, indicating ongoing apprehensions in the labor market. Additionally, while inflation expectations have eased slightly to 6.5% from April's 7%, economists warn that the impact of tariffs may rekindle inflationary pressures in the coming months.

The rebound in consumer confidence also had a positive effect on financial markets. Major U.S. stock indexes rallied, with the S&P 500 rising by 2%, the Dow Jones Industrial Average gaining 1.8%, and the Nasdaq composite surging 2.5%. This uptick reflects investor optimism fueled by the improved consumer sentiment and the temporary easing of trade tensions.

While the May data indicates a promising turnaround in consumer confidence, experts caution that the sustainability of this trend depends on the resolution of ongoing trade disputes and the management of inflationary risks. Continued monitoring of economic indicators will be essential to assess the long-term trajectory of consumer sentiment and its impact on the broader economy.