Despite rising trade tensions with China, rising geopolitical concerns with North Korea and Iran, and a weak stock market, US consumers remain surprisingly confident. In the latest read for the month of May, Consumer Confidence rose much more than expected, hitting a level of 134.1 up from last month’s reading of 129.2 and much higher than the consensus forecast of 130. At current levels, overall sentiment isn’t far from its peak reading of the cycle (137.9) from last October.
While the gap between consumers’ perception of their Present Situation and Expectations remains uncomfortably wide, both measures saw comparable increases this month. In the case of the Present Situation component, though, that reading is at a new high for the cycle (highest since December 2000).
The main reason consumers remain so confident in the face of macro headwinds is that the job market remains so strong. The percentage of consumers responding that jobs are ‘plentiful’ rebounded to 47.2% in May, which is a new high for the cycle and the highest monthly reading since January 2001.
To us, the most surprising aspect of this month’s report is the fact that sentiment towards the stock market improved. Even though all of the major US equity indices are down in May, the percentage of consumers expecting stock prices to rise increased to 42% from 37.3%, while the percentage of bearish consumers dropped to 22.2% from 24.4%. From a contrarian perspective, it would be much more preferable to see sentiment turning more cautious as stock prices declined. Start a 2-week free trial to Bespoke Institutional for full access to our research and interactive tools.