US consumer confidence rose in May as households grew more upbeat about the labor market, suggesting the economy remained on solid ground despite signs that activity was slowing after being temporarily boosted by exports and a build-up of inventories.
The surge in confidence reported by the Conference Board on Tuesday came despite an escalation in tensions in the 10-month trade dispute between the US and China. It mirrors strength exhibited by another sentiment surveys in the middle of this month.
Economists said the strong readings likely did not fully capture the impact of the trade standoff between Washington and Beijing. The cut off date for the Conference Board survey was 16 May.
The US raised existing tariffs on $200-B in Chinese goods to 25% from 10% on 10 May, prompting Beijing to retaliate with its own levies on American imports.
The Conference Board said its index of consumer attitudes increased 4.9 points to a reading of 134.1 this month, climbing up to levels seen last November when the index was hovering near 18-year highs. Economists polled by Reuters had forecast the index rising to 130.0 this month.
The survey’s expectations index, based on consumers’ short-term outlook for income, business and labor market conditions, increased to a reading of 106.6 this month from 102.7 in April.
The Conference Board survey’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, increased to 36.3% from 33.2% in April. That measure closely correlates to the unemployment rate in the Labor Department’s employment report.
The labor market is tight, with the unemployment rate at 3.6%, a mark last seen 50 years ago.
Consumers anticipated inflation would remain muted over the next 12 months. The survey’s 1-year inflation expectations fell to 4.4% in May from 4.6% in April.
Inflation has been benign despite the tight labor market, prompting calls from President Trump for the Fed to cut interest rates. The U.S. central bank recently suspended its 3-year interest rate hiking campaign and last month showed little desire to alter its monetary policy stance.
Other data Tuesday showed a further moderation in house price inflation, which could help support the struggling housing market. But a chronic shortage of lower-priced homes remains an obstacle amid strong demand that has been stoked by declining mortgage rates.
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