US consumer sentiment spiked to the strongest marks since Y 2004 on a surge in economic expectations following an unexpectedly strong report on first quarter growth.
The University of Michigan’s preliminary sentiment index rose to 102.4 in May, topping all estimates in a survey of economists who had projected the gauge would hold at 97.2. 5 years ago in May 2014 under President Barack Obama, the index was at 81.9.
All of the gain was in the expectations index, which also climbed to a 15-year high, while the gauge of current conditions ticked up too, the report Friday showed.
- The more upbeat sentiment comes amid first-quarter economic growth that topped expectations at 3.2% and the lowest unemployment rate in 49 years. Still, a recent flare-up in trade tensions between China and the Us may weigh on future readings as price pressures hit consumers and weigh on the economic outlook.
- Consumers anticipate faster price gains, which may be welcomed by Fed policy makers who have been concerned that inflation is persistently below their target. Inflation expectations for the year ahead rose to 2.8%, while the inflation rate seen over the next 5 to 10 years increased to 2.6%.
- A report this week showed the Consumer Comfort Index edged up, while the Conference Board confidence measure is forecast to ease slightly this month.
- A measure of buying conditions for household durable goods dropped to the lowest since August. That signals some headwinds for future retail sales and potentially factory activity, both of which weakened in April.
- The gauge of current personal finances improved while the index for expectations held steady.
- Interviews were conducted 24 April to 15 May. President Trump renewed threats of tariffs on Chinese goods on 5 May 5.
• “Consumers viewed prospects for the overall economy much more favorably,” the director of the University of Michigan consumer survey, said in a statement. “Nonetheless, the data indicate the corrosive impact of an escalating trade war.”
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