US consumer sentiment improves more than expected in December

Consumer sentiment in the US improved more than expected in December, according to preliminary figures released on Friday, as Americans reckoned President-elect Donald Trump’s policies would boost economic growth.

The University of Michigan’s preliminary index of consumer sentiment rose to 98 from 93.8 last month and 92.6 in December last year, beating expectations for a reading of 94.5.

The current economic conditions index pushed up to 112.1 from 107.3 in November and 108.1 in December 2015.

Meanwhile, the index of consumer expectations increased to 88.9 from 85.2 last month and 82.7 in December last year.

Surveys of Consumers chief economist Richard Curtin said: “Consumer confidence surged in early December to just one-tenth of an Index point below the 2015 peak—which was the highest level since the start of 2004. The surge was largely due to consumers’ initial reactions to Trump’s surprise victory. When asked what news they had heard of recent economic developments, more consumers spontaneously mentioned the expected positive impact of new economic policies than ever before recorded in the long history of the surveys.

“The most important implication of the increase in optimism is that it has raised expectations for the performance of the economy. President-elect Trump must provide early evidence of positive economic growth as well as act to keep positive consumer expectations aligned with performance. Either too slow growth or too high expectations represent barriers to maintaining high levels of consumer confidence. Until specific policies are proposed, there is no reason to alter the 2017 forecast of 2.5% for real consumption.”

Pantheon Macroeconomics said: “The consensus looked timid in the light of the sharp jump in both the Conference Board confidence index for November and the TIPPOnline data for December. Clearly, the election triggered a spike in confidence, either because of the outcome - though that seems odd, given that Mr. Trump lost the popular vote - or because of relief that it is all over.”