Presidential honeymoon increases consumer sentiment


Consumer sentiment increased after the presidential elections, coming up from October’s drop in confidence, according to the Survey of Consumers conducted by the University of Michigan.

This increase follows November’s early look which showed consumers starting to become more optimistic just before the elections took place.

“The initial reaction of consumers to Trump’s victory was to express greater optimism about their personal finances as well as improved prospects for the national economy,” said Richard Curtain, Survey of Consumers chief economist. “The post-election boost in optimism was widespread, with gains recorded among all income and age subgroups and across all regions of the country.”

“The upsurge in favorable economic prospects is not surprising given Trump’s populist policy views, and it was perhaps exaggerated by what most considered a surprising victory as well as by a widespread sense of relief that the election had finally ended,” Curtin said. “To be sure, no surge in economic expectations can long be sustained without actual improvements in economic conditions.”

The Index of Consumer sentiment increased 7.6% from last month’s 87.2 to 93.8 in November. This is an increase of 2.7% from last year’s 91.3. Current economic conditions also increased to 107.3, up 4% from 103.2 last month and 2.9% from 104.3 last year.

Finally, the Index of Consumer Expectations showed the greatest increase with its 10.9% monthly increase from 76.8 in October to 86.2 in November. This is an increase of 2.8% from last year’s 82.9.

An article by Jill Mislinski for Advisor Perspectives explains what this means historically:

The Michigan average since its inception is 85.4. During non-recessionary years the average is 87.6. The average during the five recessions is 69.3.

“Presidential honeymoons represent a period in which the promise of gains holds sway over actual economic conditions,” Curtin said. “Presidential honeymoons, however, can quickly end if they are unaccompanied by prospects that economic conditions will actually improve in the future.”

“President-elect Trump appears to appreciate the importance of his first hundred days; the key issue is whether his economic policies will resonate with the nation’s consumers,” he said.

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