The Trump administration caught a rare break on the domestic economic sentiment front Friday, when the final read on America’s marquee macro mood gauge showed a meaningful uptick from the preliminary assessment released earlier in the month.
At 56.4, the University of Michigan headline rose 6.6% from December’s final reading, the largest month-to-month gain since the rebound from the “Liberation Day” debacle.
January’s gain was the second straight, but as the figure below reminds you, there’s a very long way to go before these readouts can be described as anything other than poor in an absolute sense.
The first estimate for this month’s headline print, you’re reminded, was 54, which barely registered as an advance.
“While the overall improvement was small, it was broad based, seen across the income distribution, educational attainment, older and younger consumers, and Republicans and Democrats alike,” survey director Joanne Hsu remarked, before quickly adding that sentiment’s still down more than 20% versus the same period a year ago, which is to say before Trump’s second term began.
If The White House wants to turn this around, Trump needs to convince voters he’s doing something to address the country’s cost-of-living crisis and I gotta tell you: I sympathize with his frustrations in that regard because he doesn’t have any viable short-term options to address a problem that didn’t start on his watch.
The overall price level reset sharply higher prior to Trump’s second term, and the only way prices are going to come down on an economy-wide basis on a compressed time frame is if there’s a deep recession. That’s not a strategy, especially not in a mid-term year. All the other solutions for mitigating high prices — e.g., real wage gains, more housing supply — involve longer time horizons.
It’s fair to say Trump’s not a student of history, so he likely has no conception of the extent to which he’s walking right into the authoritarian populist trap with threats of heavy-handed intervention in the price-setting process and desperate-sounding cash handout gimmicks. That’s straight from a playbook he doesn’t know he’s following, and (far) more often than not, it’s counterproductive — particularly when paired with unduly loose monetary policy.
In any case, the current conditions index in the Michigan release rose to 55.4 in the final read for this month, up from 52.4 as initially reported and more than five points off the record-low hit in November.
The expectations gauge was likewise marked up for January to 57 from an originally-tipped 55. That’s a six-month high.
Notably, interviews for this month’s final sentiment release were concluded on January 19, two days after Trump’s Greenland tariff broadside. He recanted those tariffs on January 21, so it’s possible sentiment improved still further this week.
Still, and as Hsu went on to say, Americans remain vexed by “pressures on their purchasing power stemming from high prices and the prospect of weakening labor markets.” Other than the tariffs, consumers “do not appear to be connecting foreign developments to their views of the economy,” she added.
Thank God for that. Because the only thing more erratic and harrowing than Trump’s domestic agenda is his foreign policy.
