Economy Watch: Consumers End ’16 in Confident Mood

Posted on December 27, 2016

U.S. consumers are currently more confident than they’ve been in years, according to the latest reading of the University of Michigan’s Consumer Sentiment Index, which was released just ahead of the Christmas holiday. The index for December came in at 98.2, up from 98.0 at mid-December, and up much more considerably from the end of November, when the reading was 93.8. A year ago, the reading was 92.6.

The reason for the uptick in good feelings? Perhaps the election. Not necessarily the outcome–the impact of the outcome is mostly still in a hard-to-predict future–but the fact that the uncertainty is now over. On the other hand, according to the Survey of Consumers Chief Economist Richard Curtin, a record number of consumers (18 percent) mentioned the expected favorable impact of Trump’s policies on the economy.

This was twice as high as the prior peak (9 percent) recorded in 1981, when Ronald Reagan took office. “To be sure, nearly as many consumers referred unfavorably to anticipated changes in economic policies, but those references were less than half as frequent as the peak level recorded just three years ago (16 percent vs. 37 percent),” Curtin noted in a statement.

It is also highly possible, however, that consumers are responding to the fact that the economy itself is as strong as it’s been in years, which means that wages are finally going up somewhat. In any case, the latest index came in at its highest level since January 2004, and that could be good news (provided the mood doesn’t change too rapidly) for retailers and retail landlords, since relatively happy consumers are more likely to spend money on consumer goods.