Consumer confidence rebounded in May after five straight months of declines as President Trump dialed back his aggressive stance on tariffs against China.
The latest index reading from the Conference Board was 98 in May, well above the 85.7 seen in April and the 87.1 economists had expected. The expectations index surged off its 13-year low seen in April, reaching 72.8 in May, far above the 55.4 in the month prior. This marked the largest month-over-month increase for that metric since May 2009.
The cutoff date for preliminary results was May 19, meaning any opinions swayed by the US-China tariff delay were likely factored in, but the latest tariff back-and-forth with the European Union and Apple (AAPL) wouldn't have been accounted for.
"This rebound is a welcome step in the right direction, but like the deal with China it may prove only a temporary reprieve until we get clearer long-term clarity on trade policy," Wells Fargo senior economist Tim Quinlan wrote in a note to clients on Tuesday.
Read more: What is consumer confidence, and why does it matter?
Since the last consumer confidence report, the US and China agreed to a 90-day pause on the bulk of duties between the two countries. The development pushed the US effective tariff rate down to about 14% from a prior estimate of 24%, per JPMorgan.
"The rebound was already visible before the May 12 US-China trade deal but gained momentum afterwards," Stephanie Guichard, a senior economist of global Indicators at the Conference Board, said in the release. "The monthly improvement was largely driven by consumer expectations as all three components of the Expectations Index — business conditions, employment prospects, and future income — rose from their April lows. Consumers were less pessimistic about business conditions and job availability over the next six months and regained optimism about future income prospects."
Tuesday's reading marks the first major shift in a sentiment measure as consumers have digested new tariff developments. Just two weeks ago, a separate release from the University of Michigan showed consumer sentiment hit its second-lowest reading on record. But most of those responses didn't include the latest 90-day tariff pause between the US and China.
Read more: The latest news and updates on Trump's tariffs
"Consumers continued to express concerns about tariffs increasing prices and having negative impacts on the economy, but some also expressed hopes that the announced and future trade deals could support economic activity," Guichard said.