Investing.com - American consumer confidence recovered in late May after recording one of the lowest readings previously earlier in the month, while long-term inflation expectations declined as fears about the economy eased following a temporary reduction in tariffs on imports from China.
The final consumer confidence index for May reached 52.2, showing an improvement compared to the initial reading of 50.8, according to the University of Michigan. However, the index remained unchanged compared to April, which is among the lowest historical levels recorded. The average estimates indicated a final reading for May at 50.8.
Consumers also expressed a more optimistic outlook on long-term inflation expectations, predicting that prices will rise by an annual rate of 4.2% over the next five to ten years, down from 4.4% the previous month, marking the first decline recorded this year.
Regarding inflation over the next year, consumers expect prices to rise by 6.6%, which is only a slight increase compared to the 6.5% recorded the previous month, according to data released on Friday. The initial reading for May indicated a rate of 7.3%.
The survey was completed on May 26, weeks after the agreement between the United States and China to temporarily reduce tariffs on imports. President Donald Trump's trade policies had contributed to increased consumer anxiety, which negatively impacted economic activity.
A government report released on Thursday showed that the US economy contracted in the first quarter of the year due to a decline in consumer spending and an expanding trade deficit due to increased imports ahead of the imposition of tariffs. Most economists expect consumer demand and business investments to remain limited throughout the year.
Economic expectations did not worsen
In a statement, Joan Hsu, the survey director, said: "Consumer confidence had declined in the preliminary reading for May, but it witnessed improvement in the second half of the month following a temporary halt to some tariffs on Chinese goods."
However, Hsu added: "Consumers see that economic expectations did not worsen compared to last month, but they are still very concerned about the future."
The government had earlier announced a slight increase in inflation-adjusted personal spending, along with moderate inflation in April.
The Michigan survey showed that income expectations remain weak, and respondents expressed ongoing concerns about the possibility of losing their jobs. The current personal financial situation index declined compared to the previous month to its lowest level since 2009.
The university's expectations index rose to 47.9 this month compared to 47.3 in April, marking the first increase since November. In contrast, the current conditions index fell to its lowest level since late 2022.
The improvement in consumer confidence since the beginning of the month reflects a rise in optimism among political independents as well as among Democrats, while confidence among Republicans declined.
Markets now
The Dow Jones Industrial Average fell by 25 points, or 0.1%. The S&P 500 Index also declined by 0.4%, while the Nasdaq Composite Index fell by 0.6%.
Gold futures are now down by 1.1% to $3307 per ounce.
Meanwhile, spot gold contracts are down by 1% to $3283 per ounce.
On the other hand, US dollar index contracts are up by 0.3%.