by Sho Chandra
Consumer confidence retreated in February from a 13-year high as Americans tempered expectations of their finances and the economy, with sentiment remaining sharply divided among party lines.
The University of Michigan said Friday that its preliminary index of sentiment cooled to a three-month low of 95.7 from 98.5 in January. The median projection in a Bloomberg survey called for 98.
While more than half of those surveyed expect better economic conditions in the future, and the share of respondents saying they were better off financially was at a 12-year high, the results reflected stark differences between Republicans and Democrats following the election of Donald Trump as president. Republicans registered sentiment about 40 points higher than Democrats, according to the survey.
“Confidence remains quite favorable,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement. Still, “the data do not reflect any closing of the partisan divide.”
Six in 10 consumers surveyed mentioned government policy, either negatively or positively.
“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 dominated by negative references to the debt and fiscal cliff crises,” Curtin said.
The sentiment report’s current conditions index, which takes stock of Americans’ view of their personal finances, was little changed at 111.2 from a reading of 111.3 in the prior month. While consumers said they were better off financially than at any other time in the past 12 years, expectations for wage gains in the coming year deteriorated.
A measure of consumers’ views of the current financial situation climbed to 129, the highest since November 2000, even as respondents’ expectations of finances fell to a six-month low. The overall measure of expectations six months from now decreased to a three-month low of 85.7 from 90.3.
Curtin said in the statement that “the best bet” is that the partisan gap will narrow and become more consistent with a moderate pace of economic growth.
“Nonetheless, it has been long known that negative rather than positive expectations are more influential in determining spending,” he said.
Interest rates were expected to increase by three out of four consumers, the highest share in a decade. At the same time, 33 percent of all households, the most since March 1984, said in January and early February that they expected the jobless rate to fall in the coming year.
Consumers projected the inflation rate in the next year will be 2.8 percent, up from 2.6 percent in the prior month’s survey. Over the next five to 10 years, they expect a 2.5 percent rate of inflation, compared with 2.6 percent in the previous month.