Consumers are optimistic about the now, but anxious about the future

Consumer confidence appears to be on the rebound – at least compared to earlier this year. Is this a real rebound, or a course correction in what has otherwise been a turbulent year?

This month’s LSEG/Ipsos Primary Consumer Sentiment Index shows a significant increase in consumer confidence after three straight months of decline. This comes shortly after other measures of consumer confidence showed similar increases in late May.

But as always, there are more layers to this onion.

Below are five charts on consumer confidence and expectations for the future.

1. Consumer confidence rebounds. Just last month, consumer confidence nearly fell to levels last seen in the COVID-19 pandemic. This month, consumer confidence saw its first increase since February, but still below its post-election surge. A rebound, but not a full rebound.
2. The future remains murky. Consumers’ views of the current economic climate, investing climate, and job market all saw jumps compared to last month. But when it comes to expectations for the future, consumers are less optimistic. Out of the four sub-indices that make up Ipsos’ consumer confidence, expectations for the future saw the lowest increase this month and remains the most muted compared to six months ago.
3. Uncertainty declines, but still historically high. Economic uncertainty decreased from April to May. But make no mistake – economic uncertainty right now is as high as it gets.
4. Inflation remains top of mind. Americans across the board remain worried about inflation and their cost of living. Some of this may be lingering effects of the 2022 inflationary episode, but it also reflects concern for inflation in the future. Indeed, some economists say that tariff-induced inflation may still be on the horizon, even if it hasn’t materialized in the numbers just yet. Watch this space.
5. What does this mean for Trump?­­ In isolation, rebounding consumer confidence might sound like good news for the President. Indeed, Trump’s approval rating ascended from late April to late May. However, concerns around Trump’s handling of the protests in Los Angeles appear to be putting a dent in Trump’s job approval numbers, at least for now.

Yes, consumer confidence has rebounded, but that doesn’t mean we’re out of the clear. Consumer confidence, particularly around consumers’ expectations for the future, remains below where it was six months ago. Experts also suggest tariff-induced inflation may still be on the horizon. Resurging conflict in the Middle East could continue to rattle consumers’ confidence in the future.

Even though things are stable now, uncertainty remains at all-time-highs and consumers haven’t forgotten. Watch this space.