MAY 20, 2019 – MORE GOOD NEWS AS CONSUMER CONFIDENCE SOARS FOR NOW
The May consumer confidence index rose to 102.4 from 97.2 in April. Economists had not expected much of a rise month over month, so the results, a 15-year high, came in as a surprise. However, the poll was taken before the US-China trade deliberations turned negative this month.
Negative references to new Chinese tariffs rose this past week and are expected to keep going through June. Last week, the White House raised tariffs to 25 percent, from 10 percent, on $200 billion worth of Chinese goods as China tried to renegotiate their trade agreement. China countered by raising taxes on $60 billion of US goods. The trade tensions could dampen consumer sentiment in the upcoming months.
The US needs consumer confidence to be high in order to spur spending, driving up GDP. If a trade deal can be worked out soon, the US economy may quickly get back on track. With the low unemployment rate, wage pressure and an uptick in consumer spending, inflation may start to take off, leading to a possible rise in interest rates. With the 4-year swap currently .04% below LIBOR, now is a very attractive time to enter a floating-to-fixed swap.