Consumer confidence in the U.S. is booming.
On Friday morning, the University of Michigan’s final reading of sentiment in March came in at 96.9, better than February’s 96.3 reading and near the strongest level for the measure in decades.
This followed Tuesday’s report from The Conference Board, which by its measure had consumer confidence at its best level since 2000.
“The continued strength in consumer sentiment has been due to optimistic views on three critical components: higher incomes and wealth, more favorable job prospects, and low inflation expectations,” said Richard Curtin, chief economist for the survey.
This report, however, continues to reflect the deeply partisan divide among consumers.
“Democrats expect an imminent recession, higher unemployment, lower income gains, and more rapid inflation, while Republicans anticipate a new era of robust growth in incomes, job prospects, and lower inflation,” Curtin said.
“It is a rare situation that combines increasing optimism, which promotes spending, and rising uncertainty which makes consumers more cautious spenders.”
On Thursday, we highlighted that an earlier series of this survey showed that positive news stories related to the government’s role in the economy had spiked since the election. This spike, however, also in part likely reflects the partisan divide we’re seeing among consumers.
Elsewhere in the UMich report, Curtin highlights an interesting trend among consumers, which is that the decline in economic growth referred to broadly as “secular stagnation” by economists has become internalized by consumers. Except that this is a good thing.
“Like economists who have lowered growth prospects, consumers have done the same, and have thus judged lower rates of growth more favorably than they would have in an earlier era,” Curtin said.
Meaning that consumers now expect less from the economy and are more optimistic relative to current growth expectations than they would have been in prior eras.
As Curtin said, “While the partisan divide will likely recede in the months ahead, consumers’ new evaluative standards will resist change… Overall, the data indicate both rising optimism as well as rising uncertainty due to the partisan divide.”