The Economy

Consumer Sentiment Gets Post-Election Boost

The University of Michigan's index reaches its highest level in nearly two years, reflecting consumers' initial reactions to Donald Trump's victory.
Matthew HellerDecember 12, 2016
Consumer Sentiment Gets Post-Election Boost

Donald Trump’s election victory has given a boost to consumer sentiment about the U.S. economy, which in December reached its highest level in nearly two years.

The University of Michigan’s latest survey of consumers showed a preliminary index of consumer sentiment reading of 98.0, up nearly 4.5% from November’s final reading of 93.8 and up 5.8% from December 2015.

“The surge was largely due to consumers’ initial reactions to Trump’s surprise victory,” Richard Curtin, the survey’s chief economist, said in a news release. “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.”

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Economists surveyed by The Wall Street Journal had expected a December reading of 94.8. The index rose for a second straight month after matching a two-year low in October.

The survey also found that consumer views of the current state of the economy improved by 4.5%, to 112.1, while views about the economic outlook rose 4.3% to 88.9.

“Consumer confidence rose immediately after the election, and the UMich survey had cautioned that it may have been exaggerated by a sense of relief that the election was over,” Business Insider noted.

Curtin said 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, but no group has adopted a pessimistic outlook for the economy.

“The most important implication of the increase in optimism is that it has raised expectations for the performance of the economy,” he added. “President-elect Trump must provide early evidence of positive economic growth as well as act to keep positive consumer expectations aligned with performance.”

The survey may augur well for retailers. “It is clear that consumers are in very good shape amidst the crucial holiday shopping season,” Andrew Hunter, U.S. economist at Capital Economics Limited, told the WSJ.