Research >> Economics
University of Michigan Consumer Confidence increased in April to 97.0
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Consumer sentiment has traveled on the high plateau established following Trump’s election, with only minor deviations from its five month average of 97.4. There is widespread agreement among consumers on their very positive assessments of the current state of the economy as well as widespread disagreement on future economic prospects. Although the partisan divide has narrowed in April, it still reflects a very pessimistic economic outlook among Democrats and a very optimistic outlook among Republicans. Partisanship has never had such a significant influence on expectations household incomes, inflation, and unemployment. The data indicate that spending will advance by 2.5% in 2017, but those gains will be uneven over time and across products.
Partisan Impact on Personal Finances
Improved finances were reported by half of all households in the past two months—the best record in more than fifteen years. Importantly, there was no partisan difference in how consumers viewed their current financial situation. In contrast, partisanship had a significant impact on how consumers judged their financial prospects: improving finances were anticipated in the year ahead by 48% of Republicans but just 31% of Democrats.
Partisan Economic Outlook
When consumers were asked about future prospects for the national economy, an improved economy was expected by 66% of Republicans but by just 18% of Democrats. This sharp partisan difference of 48 percentage points represented a significant improvement over last month’s 68 point difference. Unemployment expectations were the most favorable since 1984, primarily due to the 59% of Republicans who expected the unemployment rate would fall below its already low rate of 4.5%; just 15% of Democrats anticipated falling joblessness.
The Consumer Sentiment Index was 97.0 in the April 2017 survey, just above the 96.9 in March, and well above last April’s 89.0. The Current Conditions Index was 112.7 in April, nearly equal to March’s decade high of 113.2, and above last April’s 106.7. The Expectations Index was 87.0 in April, just ahead of the 86.5 in the prior two months, and well above last April’s 77.6.
Selective perception of economic news is the driving force behind the partisan divide. Favorable economic developments were cited by nearly every Republican in the April survey, while three-quarters of Democrats report-ed hearing negative news about the economy. The re-lease of 1st quarter GDP and assessments of Trump’s first 100 days are more likely to encourage continued selective perceptions rather than to reduce the preva-lence of extreme partisan views. Optimism among Inde-pendents, who may be less susceptible to the sway of political ideologies and account for 42% of all consumers, have posted strong gains in the past few months. While the partisan extremes will heighten uncertainty, Independents will help to stabilize the pace of growth.
Posted: April 28, 2017 Friday 10:00 AM