What Tariffs? U.S. Consumer Confidence Is Much Higher than Expected In May

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U.S. consumer confidence surged in May, snapping five straight months of decline. The Conference Board’s index climbed to 98.0, far exceeding the Dow Jones forecast of 86.0. The uptick follows President Donald Trump’s decision to halt or delay several aggressive tariffs, which appears to have eased economic concerns. To interpret this number correctly, it helps to know that the index is benchmarked to 1985, a stable economic year scored at 100. A rating above 100 suggests stronger-than-average confidence. A rating below 100 reflects weaker sentiment. So, while 98.0 remains slightly under that benchmark, it marks a strong rebound from April’s 85.7 and signals renewed optimism for what the government is doing.

That optimism appears to be grounded in reduced trade uncertainty. After Trump suspended a 145% tariff on Chinese goods and delayed similar moves against the EU and UK, inflation fears started to cool. Gas prices dropped to $3.17 per gallon, which is down from $3.59 last year, and consumer prices in March rose at a slower pace. Core inflation slipped from 3% to 2.6%, a sign that household budgets may be stabilizing.

Why the Consumer Confidence Rebound Matters for the Market

Consumer spending drives over two-thirds of U.S. economic activity. The May confidence rebound includes a 12.3-point jump in the overall index and a 17.4-point increase in short-term expectations. That expectations index remains under the recession signal of 80 but is moving in the right direction.

More Americans now expect jobs to become available, and fewer think layoffs are ahead. While only 31.8% say jobs are “plentiful,” that’s a steady figure given recent market stress. Meanwhile, 26.6% expect job losses, down from 32.4% in April. These shifts suggest that households believe conditions are starting to improve, even if risks remain.

Trade Tariffs Still Dominate Sentiment

Though tariffs have not been fully lifted, the recent policy pause reduced anxiety. Most respondents cited trade disruptions as their top concern. However, the tone has changed. Instead of fearing escalation, consumers now expect ongoing talks and less abrupt action.

The Conference Board reported rising optimism across income, age, and political groups, with Republican respondents showing the largest gains. Importantly, this survey closed before Memorial Day weekend, meaning the full effects of the paused EU tariffs are not yet captured. If calm continues, confidence could keep rising in June.

How Business Owners and Investors Should Respond to the Good News

Investors are no longer ignoring consumer sentiment. Forty-four percent now believe stocks will rise over the next year, which is a 6.4-point increase since April. That aligns with job market data, which shows employers added 177,000 jobs in April and kept unemployment at 4.2%.

This is the moment for business owners to re-engage with their customer base. Higher consumer confidence usually means more discretionary spending. Retail, travel, and entertainment sectors could benefit first. Still, this optimism could unravel if policy shifts again or inflation rebounds.

For investors, now is the time to identify stocks that benefit from rising household activity. Consider transportation, financial services, and small-cap firms focused on U.S. consumers. But keep watch on future trade decisions. A single tariff order could erase these gains.

Consumer Confidence Is Up, But It’s Not Absolute

Despite the improvement, consumer confidence has not yet passed the long-term average of 100. Expectations are still cautious, and job market sentiment is mixed. Most notably, inflation and interest rates continue to pose risks.

That said, the momentum has shifted. May’s results show a clear break from the pessimism of earlier this year. Confidence is rebuilding, and if policy stays stable, investors may find new opportunities to grow alongside it.

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