Consumers are happy as the new year begins.
Two major barometers of the nation’s mood clearly say so, and one important reason appears to be the confidence people have that President-elect Donald Trump will deliver on what he has said will be a pro-growth economic agenda.
“The election of Donald Trump has raised household expectations for the economy to a very high level,” Stephen Stanley, chief economist at Amherst Pierpont Securities, told MarketWatch last week after The Conference Board reported that its Consumer Confidence Index rose to 113.7 in December from a revised 109.4 in November.
The reading was the highest for the index in 15 years.
“It remains to be seen whether Trump can deliver, but the ground would certainly appear to be ripe for a pickup in consumer spending, based on these confidence data,” Stanley added.
Lynn Franco, director of economic indicators at The Conference Board, said the main reason the confidence index climbed was an increase in the public’s expectations.
“The post-election surge in optimism for the economy, jobs and income prospects, as well as for stock prices, which reached a 13-year high, was most pronounced among older consumers,” Franco said in a statement.
“Consumers’ assessment of current conditions, which declined, still suggests that economic growth continued through the final months of 2016. Looking ahead to 2017, consumers’ continued optimism will depend on whether or not their expectations are realized.”
The previous week, the University of Michigan’s final Consumer Sentiment Index for December reached 98.2, its highest level in 12 years.
“Consumers anticipated that a stronger economy would create more jobs, although expected wage gains were quite meager,” Richard Curtin, chief economist of the university’s Surveys of Consumers, said in a statement.
“Smaller income gains were offset by record-low inflation expectations. Needless to say, the overall gain in confidence was based on anticipated policy changes, with specific details as yet unknown. Such favorable expectations could help jump-start growth before the actual enactment of policy changes and form higher performance standards that will be used to judge the Trump presidency.”
Stock investors have been cheery for weeks, and the nation’s three major indexes ended 2016 with solid gains. A post-election rally helped give the Dow Jones industrial average a 13 percent increase for the year. The Standard & Poor’s 500 index finished 9.5 percent higher and the Nasdaq composite index rose 7.5 percent.
In a weekend report, Reuters said the stock market could sag in 2017 if investors’ hopes for the success of Trump administration policies are dashed.
"If anything, we head into the new year with the likelihood we will probably see some near-term weakness in equities, primarily because of the move we’ve seen higher," Peter Kenny, senior market strategist at Global Markets Advisory Group in New York, told Reuters. "You will see some winning trades being taken off the table and, in general, a reset."
This Friday’s report on the December job market will be the last before President Obama hands power to the Trump administration on Jan. 20. MarketWatch said economists’ consensus forecast is that the nation added 170,000 nonfarm jobs and that the unemployment rate rose slightly to 4.7 percent from 4.6 percent the previous month.
Ahead of the jobs report, economy watchers will see December motor vehicle sales data today. The forecast is that sales were at a seasonally adjusted annual rate of 17.8 million, slightly below the 17.9 million pace of November.
During the election campaign Trump dismissed reports that the economy was improving. Now that he has been elected, the Los Angeles Times notes, he is cheering an economy that already was rallying and claiming credit for the rise in consumer confidence, Carrier Corp.’s decision to keep some workers in Indiana in return for economic incentives and other good economic news.
Much of Trump’s support appears to be based on strongly held hopes for the near future, but Republican pollster Frank Luntz told the Times that the incoming president’s voters can be expected to give him time to deliver on his promises.
“I don’t want to give the impression that they think happy days are here again. Because they don’t,” Luntz said. “But they think now that someone is listening.”
Matt McDonald, a partner at Hamilton Place Strategies and a Republican strategist, told the Times that Trump’s boosterism is what working-class voters want to see.
“They want to see someone fighting not for a good policy environment where business can create jobs; they wanted someone fighting for their job at their factory more concretely,” he said.