Trump's victory has consumer confidence near a 12-year high by Myles Udland |
December 9, 2016
US consumers are feeling
good about Donald Trump.
The preliminary read on consumer sentiment
in December from the University of Michigan released Friday
showed the index rose to 98.0, just 0.1 below the measure’s
2015 peak, which was the highest since 2004.
“The surge was largely due to consumers’
initial reactions to Trump’s surprise victory,” said Richard
Curtin, chief economist for the survey of consumers.
“When asked what news they had heard of
recent economic developments, more consumers spontaneously
mentioned the expected positive impact of new economic policies
than ever before recorded in the long history of the surveys.”
Friday’s numbers add to the UMich survey’s
initial reading after the election, released on November
23, which showed a spike in confidence attributed in part
to the election of Trump and in part due to relief the election
was over.
Other recent readings on the health of the
consumer have also been positive, with the second estimate
of third-quarter GDP showing personal consumption rose 2.8%
during the quarter, more than initially reported. The Conference
Board’s consumer confidence measure also rose to a 9-year
high in July. Consumer spending accounts for about 70% of
GDP.
Now, this boost in confidence doesn’t mean
there aren’t consumers who don’t view Trump’s election,
or the general state of play in the economy, as positive
developments.
“To be sure, an equal number volunteered
negative judgments about prospective economic policies,
but the frequency of those negative references was less
than half its prior peak levels, whereas positive references
were about twice its prior peak,” Curtin said Friday.
“There were a few exceptions to the early
December surge in optimism, mainly among those with a college
degree and among residents of the Northeast, although no
group has adopted a pessimistic outlook for the economy.”
Given the essential role consumers play
in economic growth, elevated expectations for the economy
in the coming years have little chance of coming to fruition
without confident consumers. For now, this piece seems to
be in place.