Consumer Confidence Rushes Higher — University of Michigan

December 23, 2016 by Douglas A. McIntyre

The announcement:

As unexpected as Donald Trump’s presidential election, consumers expressed much more positive economic expectations following his victory.

While the surge in confidence ended by mid-December, it nonetheless led to the highest level of the Sentiment Index since January 2004, according to the University of Michigan Surveys of Consumers.

An all-time record number of consumers spontaneously mentioned the expected favorable impact of Trump’s policies on the economy, according to U-M economist Richard Curtin, who directs the Surveys.

Consumers anticipated that a stronger economy would create more jobs, although expected wage gains were quite meager. Smaller income gains were offset by record low inflation expectations. Overall, after a contentious election, to a surprising degree, consumers have given the incoming president the advantage of economic optimism and confidence in his policies.

Conducted by the U-M Institute for Social Research (ISR) since 1946, the Surveys monitor consumer attitudes and expectations. The data are available non-exclusively via Bloomberg.

“Needless to say, the record gain in consumer confidence was based on anticipated policy changes, with the specific details as yet unknown,” Curtin said. “On the positive side, such favorable expectations could help jump-start growth before the actual enactment of new policies. A potential drawback is that these favorable expectations will act as a much higher performance standard that people will use to judge the effectiveness of Trump’s policies. More substantial wage gains are critical to the success of Trump’s expansive fiscal policies as well as the shift toward less expansive monetary policies. Until more is known, the 2017 real consumption forecast is 2.7 percent.”

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