Consumer Sentiment is Improving, But Fell Short Of Post-Election Bump Expectations

The first major consumer sentiment since the presidential election showed that people felt better about the economy, but the bump wasn’t as big as economists were expecting.

The Michigan Consumer Sentiment Index for November finished at 71.8, an improvement over the October reading, but it was below the preliminary November reading of 73.0, where consumer surveys were concluded just before the election of Republican Donald Trump to the presidency. The final reading was also lower than the forecast of 73.5 by economists surveyed by The Wall Street Journal and Dow Jones Newswires.

The final result showed that sentiment declined for some consumers after the election result, said Joanne Hsu, director of the Michigan Surveys of Consumers.

“The expectations index surged for Republicans and fell for Democrats this month, a reflection of the two groups’ incongruous views of how Trump’s policies will influence the economy,” Hsu wrote. 

Sentiment Improves for Fourth Straight Month

Overall, consumer sentiment has incrementally improved over the past four months in the run up to the Nov. 5 election. Sentiment often dips during presidential campaigns as voters are uncertain about the path of the economy, but consumers will often feel better about economic conditions once the election is decided. The survey showed that while feelings about current economic conditions dipped some in November, their expectations for future economic growth moved higher.

“Broadly, consumers expect moderate improvement in the economy over the next six months, but there was a more nuanced shift in sentiment that tended to track with political affiliation and individual respondents’ view on the election’s outcome,” said Jim Baird, chief investment officer with Plante Moran Financial Advisors. 

Inflation Expectations Adjust Ahead of Trump’s Tariff Proposals

The survey also showed a change in sentiment on inflation, which many economists think will move higher if Trump enacts the tariffs he proposed during the campaign. Federal Reserve officials closely follow consumer inflation expectations as they can help influence the path of prices. 

Year-ahead inflation expectation declined to 2.6%, down a tick from the prior month, but inflation expectations for five years out increased to 3.2%, showing increasing uncertainty over long-run prices. 

“While consumers recognize that inflation has receded significantly, there’s less certainty that the Fed’s ability to hold inflation near its 2% target over the long term,” Baird said.