Widespread Pessimism or Glimmers of Hope? US Consumer Confidence After the 2016 Presidential Election
The 2016 US presidential election can be characterized by widespread discontent with the status quo. Indeed, a supermajority of Americans see the system as broken. And strong majorities across party lines believe that America is on the “wrong track”.
However, American consumer confidence has strongly rebounded since the Great Recession (bottomed in 2009), showing especially strong growth over the last few years:
- The US is at its highest levels since the mid 2000’s.
- American consumer confidence now leads G7 countries, including Germany.
- And, at a global level, the US ranks fourth only behind China, India, and Sweden.
The empirical evidence here leads to a key question: How can Americans be confident about the economy but believe America is on the wrong track?
This, in turn, leads to other questions such as:
- Is politics increasingly divorced from the economy? And why if this is so?
- Is this American malaise more cultural or spiritual than economic?
These are answers that we intend to answer over the coming months as we explore them in more detail.
Strong belief that the system is broken
View that America is on the wrong track
But American consumers are increasingly confident about the economy!
Appedix: Thomson Reuters/Ipsos US Primary Consumer Sentiment Index (PCSI)
These are findings of an Ipsos online poll conducted November 25 to December 9, 2016. For this survey, a national sample of 1000+ adults aged 18-64 from Ipsos’ US online panel was interviewed online. Weighting was then employed to balance demographics and to ensure that the sample’s composition reflects that of the US adult population according to Census data and to provide results intended to approximate the sample universe. The precision of the Thomson Reuters/Ipsos online polls is measured using a Bayesian Credibility Interval. In his case, the poll has a credibility interval of plus or minus 3.0 percentage points for all adults. For more information on the Bayesian Credibility Interval please see http://www.ipsos-na.com/news-polls/pressrelease.aspx?id=5836
The Thomson Reuters/Ipsos US Primary Consumer Sentiment Index (PCSI), ongoing since 2010, is a monthly national survey of consumer attitudes on the current and future state of local economies, personal finance situations, savings and confidence to make large investments. The Index is composed of four sub-indices: Current Conditions Index; Expectations Index; Investment Index; and, Jobs Index. The PCSI Index is benchmarked to a baseline of 100 assigned at its introduction in January 2010. Index number is calculated by utilizing data from the survey results. Responses are divided into aggregated Top Box (Reward) numbers and Bottom Box (Penalty) numbers. Using Shapely Value Analysis, values were generated for the penalty and reward for each question. The magnitude of each question is the difference between the reward and penalty. An Importance factor, which the ultimate weight of the particular question in the index, is the magnitude of each question divided by the total magnitude of all questions. A Top Box Weight for each question is calculated by dividing the Reward by the magnitude of each question. Similarly, the Bottom Weight for each question is calculated by dividing the Penalty for each question by magnitude of the same. The Index Value for each question is calculated by using the formula: Importance x (Top Box Wt * Top Box %) – (Bottom Box Wt * Bottom box %).
The questions used for the PCSI are as follows:
- Now, thinking about our economic situation, how would you describe the current economic situation in US? Is it… very good, somewhat good, somewhat bad or very bad
- Rate the current state of the economy in your local area using a scale from 1 to 7, where 7 means a very strong economy today and 1 means a very weak economy.
- Looking ahead six months from now, do you expect the economy in your local area to be much stronger, somewhat stronger, about the same, somewhat weaker, or much weaker than it is now?
- Rate your current financial situation, using a scale from 1 to 7, where 7 means your personal financial situation is very strong today and 1 means it is very weak
- Looking ahead six months from now, do you expect your personal financial situation to be much stronger, somewhat stronger, about the same, somewhat weaker, or much weaker than it is now?
- Compared to 6 months ago, are you NOW more or less comfortable making a major purchase, like a home or car?
- Compared to 6 months ago, are you NOW more or less comfortable making other household purchases?
- Compared to 6 months ago, are you NOW more or less confident about job security for yourself, your family and other people you know personally?
- Compared to 6 months ago, are you NOW more or less confident of your ability to invest in the future, including your ability to save money for your retirement or your children’s education?
- Thinking of the last 6 months, have you, someone in your family or someone else you know personally lost their job as a result of economic conditions?
- Now look ahead at the next six months. How likely is it that you, someone in your family or someone else you know personally will lose their job in the next six months as a result of economic conditions?