After a few weeks of bad news about the state of U.S. retail, a bright spot appeared on the horizon Friday as consumer confidence took a turn for the better.
The University of Michigan preliminary consumer-sentiment index for May was 95.8, up from April’s 89.0 and beating economists’ estimates of 89.7. This reading was the highest level since June 2015 and the best month-to-month turnaround since 2006.
“Consumer sentiment rebounded in early May due to more frequent income gains, an improved jobs outlook, and the expectation of lower inflation and interest rates,” Richard Curtin, the survey’s chief economist, said in a statement. “The largest gains were recorded among lower income and younger households, although the gains were recorded among all income and age subgroups as well as across all regions.”
Nearly all of the gains were in the consumer-expectations index, which rose 12.8% from April’s final reading of 77.6 to 87.5, and was up 3.9% year-over-year. The index tracking consumer views of current economic conditions also increased to 108.6, compared with 106.7 last month and 100.8 a year ago.
“To be sure, the data still indicated the negative impact of uncertainty about future economic policies associated with the Presidential election,” Curtin continued, “But its overall impact was overwhelmed by favorable economic developments.”
The monthly report surveys 500 households on their attitudes toward business conditions, unemployment, personal finances and inflation.