Economic surveys for the month of May suggest an increase in consumer sentiment in spite of higher gasoline prices.
The University of Michigan’s consumer sentiment index showed a reading of 102.4 (a jump of 5.2 compared to last month). Economists had predicted a much smaller increase.
Consumer sentiment is an important metric used to gauge the health of the US economy as determined by public opinion. In the US, consumer spending represents more than two-thirds of all economic activity.
“Consumers viewed prospects for the overall economy much more favorably, with the economic outlook for the near and longer term reaching their highest levels since 2004,” writes Michigan economist Richard Curtin.
Michigan’s survey also showed an increase in consumer expectations, which rose from 87.4 in April to 96 in May.
The gains were recorded early this month before Trump increased tariffs on $200 billion in Chinese goods in response to failed negotiations.
Trump further irritated China this week by requiring US firms to obtain a special license in order to do business with Chinese telecom company Huawei. Shares of Qualcomm and Micron Technology dropped 1.6% and 3.4%, respectively. Apple shares dropped 0.6%.
Analysts expect the friction with China to have a negative impact on consumer and business confidence that could slow the pace of consumer spending in late May and June.
“So the recent improvement in sentiment may turn out to be short-lived,” explains JPMorgan economist Daniel Silver. “While the ultimate response to tariffs is still unclear, the survey results suggest that consumer sentiment was upbeat before the developments on trade policy from the past couple of weeks.”
Survey results also suggest Americans are expecting higher inflation during the next 12 months, but a key measure tracked by the Federal Reserve shows inflation slowing below the agency’s target.
Editor’s note: Despite Biden’s BS claims, this is Trump’s economy and it is booming!