Consumer confidence looked a little shaky in second-tier US macro data released on Tuesday.
The headline from the Conference Board was a lackluster 104.1. Consensus wanted something closer to 106.
December’s headline was revised higher but still showed a drop, which means January marks two monthly declines in a row. 104.1 counted as the worst read since September.
As the simple figure reminds you, the Conference Board gauge remains stuck in a range, and it’s nowhere near levels observed prior to the pandemic. Slippage in December and again in January suggest whatever “animal spirits” Trump’s reelection might’ve conjured didn’t stick around very long.
Both the present situation and expectations indexes likewise printed four month lows, with the latter slipping to 83.9, just barely above the 80 threshold. Historically, readings below 80 were associated with the onset of recession within 12 months, but that “rule” hasn’t been much use in the 2020s.
Somewhat amusingly in the context of Trump’s grandiose declarations about an American renaissance, the labor differential, at 16.2, was the worst since Kamala Harris was ahead in the polls, and consumers’ assessments of business conditions weakened again.
Declines were most pronounced among high-earners, whereas those at the bottom exhibited more in the way of optimism. I know the lower-income cohort in the motley MAGA coalition takes Trump at his word when it comes to empty promises about resurrecting the “forgotten” American everyman, so I can understand why that group might be feeling better about things. But did the rich not get the memo about the tax cuts? If not, here’s the CliffsNotes version: Trump’s policies are designed specifically to benefit high earners. The more you earn, the better you’ll generally come out. So, perk up rich people.
Looking a little further into the release, a forward-looking gauge of “family finance expectations” hit a new record high, a measure of recession expectations loitered near a record low and consumers are generally optimistic about the stock market (fewer than one in four respondents suspect equity prices might be lower a year from now). So that’s all good news.
Bottom line: There’s a lot of uncertainty out there, and that’s holding back the main sentiment aggregates, even as the under-the-hood gauges admit of more nuance.
I suspect consumers (i.e. citizens) are going to quickly realize this is Trump 2.0 and the craziness they were warned about the first time is coming out uninhibited this time. The brakes went out and now we are barreling toward chaos. How will those folks feel when their Head Start preschool program or the local hospital is shut down because of his funding pause? How will small business owners feel when they don’t know whether they’ll be able to buy the food they need for their restaurant or their inputs get a 25% tariff slapped on them without warning?
There is no logic in Trump’s tactics. The only guiding principles are sowing fear and deporting immigrants, dismantling DEI programs that have no impact on the vast majority of people, and dismantling regulations and oversight. Trump’s “national energy emergy” doesn’t make any sense considering no one thinks we have a fossil fuel shortage and kneecapping renewable investment will raise energy prices. His national defense strategy is an “iron dome” which is useless for the US.
Tax cuts and inflation have taken a backseat in Trump’s retribution tour and I’d be willing to bet Republicans are already sweating behind closed doors. How many times have they already had to fall back on “I haven’t seen the details yet” regarding Trump’s actions?
If poor people were ever going to realize a cadre of the ultra-rich were not going to help them, it would have been obvious when Reagan cut tax on the richest in the hopes of “Starving the Beast” of Social Security and Medicare. When Trump’s policies fail, they will blame something or even better, someone else. Works every time.
Yes, thank you Pyro