Reflecting a spike in consumer expectations, the University of Michigan released a report on Friday showing a substantial improvement in U.S. consumer sentiment in the month of May.
The preliminary report showed the consumer sentiment index surged up to 102.4 in May from 97.2 in April, reaching its highest level in fifteen years. Economists had expected the index to inch up to 97.5.
The much bigger than expected increase by the headline index came as the index of consumer expectations soared to 96.0 in May from 87.4 in April.
“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,” said Surveys of Consumers chief economist Richard Curtin.
However, Curtin noted, “The gains were recorded mostly before the trade negotiations with China collapsed and China responded with their own tariffs.”
The report showed consumers’ view of current conditions was virtually unchanged, with the current economic conditions index ticking up to 112.4 in May from 112.3 in April.
On the inflation front, the report said one-year inflation expectations jumped to 2.8 percent in May from 2.5 percent in April and five-year inflation expectations shot up to 2.6 percent from 2.3 percent.
“Even apart from the direct impact of tariffs on prices, rising tariffs could cause a more general loss of confidence which could further diminish the pace of consumer spending,” Curtin said.
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