The Conference Board's Consumer Confidence Index rebounded in May to 98.0, up from a revised 85.7 (previously 86.0) in April, and exceeding expectations of 87.3 in the Econoday survey of forecasters. Consumers' assessment of current business and labor market conditions improved, while their short-term outlook for income, business, and labor market conditions surged although it failed to break above the threshold that would mean reduced expectations for a recession ahead.

The rebound was already visible before the May 12 US-China trade deal but gained momentum afterwards, the report said. The monthly improvement was largely driven by consumer expectations as all three components of the Expectations Indexbusiness conditions, employment prospects, and future incomerose from their April lows.

U.S. consumers had a less pessimistic assessment of business conditions and job availability over the next six months and had renewed optimism about future income prospects. Their views of the present situation also improved. However, while consumers were more positive about current business conditions than last month, their appraisal of current job availability weakened for the fifth consecutive month, the Conference Board warned.

The Conference Board said the share of consumers expecting a recession over the next 12 months declined.

Average one-year inflation expectations fell to 6.5 percent in May from 7 percent in April. Inflation and elevated prices remain top of mind, as consumers continued to express concerns about tariffs increasing prices and having negative impacts on the economy, but some also expressed hopes that the announced and future trade deals could support economic activity.

On a six-month moving average basis, purchasing plans for both homes, autos, and vacations increased notably. Likewise, plans to buy big-ticket items including appliances and electronics also rose, as did consumers' intentions to purchase more services in the months ahead, with almost all services categories rising, the Conference Board said.

The consensus looks for a correction upward to a still-gloomy 87.3 in May from 86.0 in April and 93.9 in March.

The Conference Board's confidence report surveys consumers on their assessments of the labor market, business activity, and their own financial conditions. The survey is conducted by Toluna, an online community platform. (Conference Board and Toluna)

The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

This balance was achieved through much of the nineties and, in large part because of this, investors in the stock and bond markets enjoyed huge gains. It was during the late nineties that the consumer confidence index hit its historic peak, reaching levels that were never matched during the subsequent 2001 to 2007 expansion nor during the long expansion following the Great Recession.

Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.