The University of Michigan Consumer Sentiment Index hit 102.4, up from 97.2 in April, despite a flat forecast. The rebound is especially welcome after sluggish confidence in the first quarter.
The reading does not account for the latest round of tariff hikes on both sides of the US-China trade war, which many economists expect to hamper business and consumer confidence, but global economic outlook and domestic sentiment are not always correlated, nor, in fact, are market returns and consumer confidence.
Consumer confidence accounts for the bulk of US economic activity, so the next reading will be key in determining the effect of the trade war.
Canadian, Mexican Tariffs Removed, Bodes Well For USMCA
The US lifted 25% and 10% steel and aluminum tariffs, respectively, from Canada and Mexico, who will lift retaliatory tariffs on certain US agricultural goods. The decision serves a twofold purpose, as it will seek to prevent substandard Chinese metals from reaching the US market, and it eases passage of the NAFTA replacement the United States-Mexico-Canada trade agreement (USMCA).