Consumers Remain Optimistic – Especially if Republicans

The latest University of Michigan Consumer Survey shows consumers are more optimistic than a year ago.  The sentiment index in March was 96.9.  A year earlier it was 91%.  That’s a 6.5% improvement.

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. All of these factors, however, have been influenced by partisanship, says the UM Survey’s chief economist, Richard Curtin.

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.

It’s a rare situation that combines increasing optimism which promotes spending as well as rising uncertainty which makes consumers more cautious spenders, Curtin says. The data indicate that spending will advance by 2.7% in 2017, but those gains will be uneven over time and across products.

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