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Consumer confidence posts big jump in May, defying trade war gloom

Javier E. David
Editor focused on markets and the economy

In this Aug. 21, 2015 photo, people shop at the CityTarget store in Boston. Plummeting stock prices have taken a toll on U.S. consumer confidence, though there are signs the setback may be temporary. The University of Michigan says its consumer sentiment index fell to 91.9 Aug. 2014 from 93.1 in July. The index is still up 11.4 percent from a year ago. (AP Photo/Michael Dwyer)

Consumers remain optimistic in the face of a volatile market and a widening trade dispute between the U.S. and China, according to new data from The Conference Board, which rose unexpectedly in May.

The Conference Board’s Consumer Confidence Index, a key metric of consumers’ willingness to keep spending, jumped to 134.1, up from April’s reading of 129.2. A consensus forecast of economists polled by Bloomberg saw the index rising to 130, up from the prior reading of 129.2.

“Consumer Confidence posted another gain in May and is now back to levels seen last Fall when the Index was hovering near 18-year highs,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.

While a booming market for jobs helped bolster the outlook, “consumers’ sentiment regarding their income prospects was mixed,” according to Franco.

Earlier this month, a separate sentiment index from Reuters and the University of Michigan showed sentiment surged to a 15-year high, but much of that data was captured before the U.S. and China slapped a new round of tariffs on each other’s imports.

All told, it suggests shoppers are still inclined to keep opening their wallets in the face of mounting pressures on the economy.

The trade war has made for volatile trading on Wall Street and led to concerns that global growth could suffer. A number of businesses and economists also think the $200 billion of tariffs on Chinese goods—and the $60 billion Beijing is poised to slap on U.S. goods in retaliation—will begin trickling down to the consumer.

Walmart (WMT), the world’s largest retailer, said earlier this month that tariffs would result in higher prices for shoppers.

“We are going to continue to do everything we can to keep prices low. However, increased tariffs will lead to increased prices for our customers,” CFO Brett Biggs told reporters on a call.

The Conference Board’s data was also released in the shadow of April retail sales that were far weaker than Wall Street expected. Gas prices, which have fluctuated ahead of the summer driving season, may also be a wild card going forward.

“Consumers expect the economy to continue growing at a solid pace in the short-term, and despite weak retail sales in April, these high levels of confidence suggest no significant pullback in consumer spending in the months ahead,” Franco said.

Javier is an editor for Yahoo Finance. Follow Javier on Twitter: @TeflonGeek

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