The Wall Street Journal reported that the University of Michigan’s preliminary Consumer Sentiment Index for February declined to 95.7 from January’s 98.5, which was the highest level in a decade.
Expectations about President Donald Trump’s policies affected consumer confidence along party lines.
The article, which is behind a paywall but was picked up in the National Marine Manufacturers Association newsletter, said the index was 4.4 percent above the same time last year, but economists had predicted a February reading of 98.0.
The university’s survey shows consumer expectations declined in early February, with Democrats’ outlook at a historic low. Nearly six in 10 respondents made a positive or negative mention of government policies.
“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 solely dominated by negative references to the debt and fiscal cliff crises,” the university said.
Never before have these spontaneous references to economic policies had such a large impact on the Sentiment Index — a difference of 37 index points between those that referred to favorable and unfavorable policies.
“These differences are troublesome: the Democrats’ Expectations Index is close to its historic low (indicating recession) and the Republicans’ Expectations Index is near its historic high (indicating expansion),” the university said.
“While currently distorted by partisanship, the best bet is that the gap will narrow to match a more moderate pace of growth. Nonetheless, it has been long known that negative rather than positive expectations are more influential in determining spending, so forecasts of consumer expenditures must take into account a higher likelihood of asymmetric downside risks,” it said.
