The post-election boost to consumer sentiment about the U.S. economy appears to have worn off, but the February level was still among the five highest in the past decade.
The University of Michigan’s latest survey of consumers showed a preliminary index of consumer sentiment reading of 95.7, down from the January reading of 98.5 that was the highest since January 2004.
The survey’s current conditions sub-index of consumer expectations dropped to 85.7 from January’s reading of 90.3.
“This might be due to a lack of follow-through from Washington on the details of the [Trump administration’s] plans for tax cuts, reforming healthcare, and infrastructure spending,” John Ryding, chief economist at RDQ Economics in New York, told Reuters.
In December, the consumer sentiment index rose to 98.0 from 93.8 the previous month. The survey’s chief economist, Richard Curtin, had attributed the surge to consumers’ initial reactions to Donald Trump’s surprise presidential election victory.
Economists surveyed by The Wall Street Journal had expected a February reading of 98.0, but the latest result is still up from 4.4% a year ago.
“The recent rise in optimism … reflects a turnaround from consumers’ attitudes in October, when sentiment had matched a two-year low,” the WSJ noted.
Democrats’ expectations in February were close to a historic low (indicating recession) and Republicans’ were near a historic high (indicating expansion). “While currently distorted by partisanship, the best bet is that the gap will narrow to match a more moderate pace of growth,” Curtin said.
“America is clearly in a politically charged environment, and that was evident in the survey results,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Mich.
The survey also showed consumers’ inflation expectations remaining generally low. “The bottom line is that consumers remain understandably upbeat, supported by continued strength in the labor markets,” Baird added.