Getting a boost from this year’s tax cut, the weekly consumer comfort index and bi-monthly consumer sentiment index have been hitting expansion highs as has the monthly consumer confidence index, according to today’s release by the Conference Board. If he hasn’t done so already, this is a Tweetable moment for President Trump. In what may be the most significant development, the number of Americans expecting their incomes to decline over the next six months (6%) fell to the lowest level since December 2000. The average American has shaken off the volatility in the stock market and the trade and tariff rhetoric, by raising their confidence in the economy to a near 18 year high.
Americans were more optimistic about their own finances and they think jobs are easy to find, the survey showed. In addition to the upbeat consumer confidence numbers, New Home Sales rose to 694K, well above the consensus of 630k. “Americans appear to think the economy is headed in the right direction and it’s not just all talk because their greater confidence is leading them to buy more new homes,” said Chris Rupkey, chief economist at MUFG in New York. The following data from the Commerce Department shows the consistent uptrend since May of 2014:
Upbeat news of this nature is expected to continue according to some economists. “Sustained improvement in incomes due to increased hiring and wage gains should keep consumer confidence elevated for a few more years,” said David Deull, U.S Economist at IHS Markit.
Economists realize that consumer confidence is at the beginning of the GDP train, in that as consumers believe in, among other things, job security, increasing income, and affordable housing, it translates into the consumption of consumer goods, which accounts for roughly two-thirds of GDP. The cycle continues with corporate earnings growth as products and services are bought, leading employers to add new workers and increase wages to those already employed.
Say what you may, but thus far the Trump tax cuts are statistically significant, rising all boats with the tide. Government data from housing to employment have all advanced of late, presumably from such cuts in taxes. The naysayers will warn of inflation, higher interest rates, and trade wars, which could stall or stop this economic growth. Fed Chairman Powell seems poised to take the baton from Dr. Yellen and manage the dichotomy that exists between growth and inflation, which is monetary policy.
Anecdotally, it makes sense that one can be more confident in the future economically if you are secure in your job, and believe that such security will continue, along with the possibility of increased income. The fact that new housing sales may be rounding is important for several reasons. In many areas, including the south and parts of the southwest, there have been shortages of new homes, thus pricing out much of the new homebuyer market. More housing not only means more availability, but the industry which was so strong last year, can continue to grow and produce jobs at a steady rate. Interest rates may or may not prompt those looking for housing to buy sooner than later. That certainly will have a say in how the housing market functions. In an economic environment where positive data is obtained in consumer confidence and housing, you have to at least tip your hat that today was a good day.