In the aftermath of a divisive presidential election, consumers have become split along party lines on the United States’ economic outlook, according to a new survey from the University of Michigan. As part of the study, researchers noted that the Democrat’s Expectations Index measured close its historic low, while the Republican’s Expectations Index hovered near a historic high. The indexes are part of a broader study gauging consumer sentiment in the United States.
While impacted by partisanship, it’s likely that the gap in sentiment between opposite party affiliates will narrow to indicate a more moderate pace of growth, said Richard Curtin, a member of the University of Michigan’s Surveys of Consumers Department. “Nonetheless,” Curtin added, “it has been long known that negative rather than positive expectations are more influential in determining spending, so forecasts of consumer expenditures must take into account a higher likelihood of asymmetric downside risks.” Nearly three out of five respondents made a positive or negative mention of government policies, a historically high amount.
On the whole, the University of Michigan’s consumer sentiment index for February slipped from a 13-year high the previous month – the first time the index fell since October. Despite the Dow Jones Industrial Average recently closing at record levels, and the Labor Department reporting an increase of 227,000 jobs in January, the consumer sentiment index measured 95.7 for February, down from 98.5 at the start of 2017. The report shows a sharp decline in consumer expectations, dropping 5.1% since January. Nonetheless, overall confidence remains strong, as only five readings have been higher in the past decade.
Consumer spending accounts for about 70% of the United States’ gross domestic product. As such, consumer sentiment can potentially provide insight into the forthcoming strength and weakness of the economy.