Key Takeaways:

  • The Conference Board said Tuesday that consumer pessimism about the future eased in May after rising for five consecutive months, as the U.S.-China tariff war cooled.
  • The business group said its consumer confidence index rose 12.3 points this month to 98. The expectations index, which measures consumers' short-term outlook for income, business, and labor market conditions, also rose sharply but remained below the level that usually signals sustained economic growth rather than a recession approaching.
  • "The rebound was already underway before the May 12 U.S.-China trade agreement but gained momentum afterward," Stephanie Guichard, senior economist for global indicators at The Conference Board, said in a statement. She was referring to the reduction of U.S. tariffs on Chinese imports from 145% to 30% within 90 days. About half of the survey responses were collected before that date.

Deep Dive:

The Conference Board said the share of consumers expecting a recession within the next 12 months fell in May, in line with economists lowering their recession probabilities.

For example, Goldman Sachs recently cut its recession probability from 45% to 35%, citing easing tensions between the U.S., China, and their trading partners.

The Conference Board said consumer confidence rose across all age groups, income brackets, and political affiliations, with the largest increase among Republicans.

The group also said consumers' expectations for average inflation over the next 12 months fell to 6.5% from 7% in April.

U.S. President Donald Trump on Sunday withdrew his threat to impose 50% tariffs on European Union goods starting June 1, giving the 27-nation bloc until July 9 to negotiate a trade deal.

Some economists think consumers may be too optimistic about the outlook for price pressures. They worry that tariffs on imports from nearly all U.S. trading partners will fuel inflation.

"Consumer confidence may be surging, and Americans have reason to be pleased given the pullback in tariffs, especially on China," Robert Frick, corporate economist at Navy Federal Credit Union, said in an email.

"But when prices start rising in a month or two due to existing tariffs, it will be a sobering reminder that a new inflation battle is just beginning," he said.

Indeed, The Conference Board said many consumers expressed concerns that tariffs would fuel inflation and slow economic growth. At the same time, "there were also mentions of easing inflation and lower gas prices."

Guichard added that 44% of respondents expect stock prices to rise over the next 12 months, up from 37.6% in April. "This is one of the survey questions that improved the most after the May 12 trade agreement."

Despite the jump in consumer confidence this month, the tariff-driven rush to buy goods that began in March has largely faded.

Data from the Commerce Department released Tuesday showed factory orders fell 6.3% in April, after rising nearly 8% the previous month as businesses rushed to buy goods before import tariffs pushed prices higher.

Correction: An earlier version of this article misstated the release date of The Conference Board survey results. The correct release date is Tuesday.