Increased before elections

Consumers grew more confident in the economy the month leading up to the presidential election.

The Index of Consumer Sentiment increased 5% from September, according to the Survey of Consumers conducted by the University of Michigan.

The index increased to 91.6 in November, up from 87.2 in October and 91.3 last year. Current Economic Conditions increased from 103.2 in October and 104.3 last year to 105.9, and the Index of Consumer Expectations increased 7.4% from last month’s 76.8 but down 0.5% from last year’s 82.9 to 82.5.

An article by Jill Mislinski for Advisor Perspectives explains what this means historically:

The Michigan average since its inception is 85.4. During non-recessionary years the average is 87.6. The average during the five recessions is 69.3.

“The recent gain in sentiment was driven by an improved outlook for the economy,” said Richard Curtin, Survey of Consumers chief economist. “The most striking finding in early November was that both near and long-term inflation expectations jumped to 2.7% from last month’s record matching lows of 2.4%.”

“These increases must be replicated before they can be taken to indicate a troublesome development; thus far, the data has simply repeated the March 2016 peaks,” Curtin said. “Nonetheless, it may be viewed as added justification for next month’s expected interest rate hike.”

Since the election, experts have presented conflicting opinions on the probability of an interest rate hike in December.

“The expected small increase in interest rates had little impact on favorable buying attitudes, and still supports a 2.5% increase in real consumer spending during 2017,” Curtin said. “Unfortunately, the November data must be accompanied by the proviso that it was collected before the result of the presidential election was known late Tuesday.”

November’s final estimates could look very different.

“The shock victory of Donald Trump means that the final estimate of confidence reported later this month could be much lower, not least because Hillary Clinton appears to have narrowly won the popular vote,” Capital Economics Economist Andrew Hunter said.