The Conference Board’s measure of consumer confidence rose in February to 114.8, not only beating the prior month’s result of 111.6, but also climbing more than economists had anticipated.
Confidence has surged in the post-election period, reflective of a renewed sense of optimism about the potential for President Trump’s pro-growth platform to jump-start growth, promote stronger job creation, and lift household income.
That surge in confidence has lifted the index to its highest point in nearly 16 years.
Whether or not those optimistic expectations will be met remains to be seen. Revised data on growth in Q4 released earlier this morning were largely unchanged, reaffirming that the economy grew by a moderate 1.9 percent in the final months of last year.
Regardless of what happened in late 2016, a broad-based surge in optimism in both the consumer and business sectors bodes well for 2017. On top of a more enthusiastic consumer mood, the small business sector in particular has expressed much greater confidence in the business outlook and an increased willingness to expand their payrolls and invest in equipment.
Other hard data points to strengthening economic conditions in recent months. Jobless claims remain near a 40-year low, while various gauges of the manufacturing and service sectors suggest a continued uptick in activity. Retail sales have also firmed, indicating a greater willingness on the part of consumers to spend.
While other measures of the consumer outlook softened modestly of late, the overall story is still a very positive one. Whether or not Washington can and will deliver on the President’s promises of regulatory reform, cuts in corporate and individual taxes, and stimulus spending remains to be seen. That is a huge wild card that has the potential to either validate that optimism or disappoint not only consumers, but investors as well.
Optimism is high; now we wait to see if it will be supported by actual policy, and whether those policies can provide the boost to growth that the President promised and that consumers are counting on.