US consumer sentiment inches higher, but partisan divide persists

US consumer sentiment edged higher in March, although not as much as analysts had expected, as political divides continue to tinge outlooks depending on whether they are members of Donald Trump’s Republican party or Democrats in the opposition.

The University of Michigan’s consumer-sentiment index hit 96.9 in March, a 0.6 increase from the previous month and a 6.5 per cent increase from a year earlier. That fell below the 97.6 reading expected by analysts surveyed by Bloomberg.

All three of the key factors contributing to the continued strength in consumer outlooks — higher incomes and wealth, favourable job prospects and low inflation expectations — are “influenced by partisanship”, according to the Surveys of Consumers chief economist Richard Curtin.

While Republicans pin their hopes to Mr Trump’s promises of lower taxes and job creation, Democrats are taking a less rosy view of things, expecting an economic pullback, higher unemployment and lower wages, Mr Curtin said.

“It is a rare situation that combines increasing optimism, which promotes spending, and rising uncertainty which makes consumers more cautious spenders,” Mr Curtin said, adding: “While the partisan divide will likely recede in the months ahead, consumers’ new evaluative standards will resist change.”