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It is the best of times, it is worst of times. That is the response the University of Michigan got when it surveyed US consumers at the start of the month.
The university’s consumer sentiment index slipped to 95.7 in February, after reaching 98.5 in the previous month — the highest mark in more than a decade.
Sentiment took a hit from a 5.1 per cent decline in consumer expectations, driven by a deep partisan divide that has come to the forefront with the election in November of US President Donald Trump. The outlook among Republicans is near its historic high, suggesting a continuation of economic expansion. But for Democrats, it is close to a historic low, pointing to a recession.
The survey also showed that consumer are keenly aware of, and divided about, what’s happening in Washington. When asked to describe “any recent news that they had heard about the economy, 30 per cent spontaneously mentioned some favourable aspect of Trump’s policies, and 29 per cent unfavourably referred to Trump’s economic policies,” said UMich surveys of consumers chief economist Richard Curtin.
Thus a total of nearly six-in-ten consumers made a positive or negative mention of government policies. In the long history of the surveys, this total had never reached even half that amount, except for five surveys in 2013 and 2014 that were solely dominated by negative references to the debt and fiscal cliff crises.
Mr Curtin said he reckons that “the best bet is that the gap will narrow to match a more moderate pace of growth”.
“Nonetheless, 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.”