Consumers were less optimistic about economic conditions this month as the heightened expectations for the Trump economy in the wake of the election have been tempered by ongoing gridlock in Washington, according to this month’s Investor’s Business Daily/TIPP Economic Optimism Index. The index declined by 1.1 points, or 2.1%, to a score of 50.2, the lowest reading since the election.
At the same time, however, the Index remained in positive territory (above 50) for the tenth straight month in July, indicating that consumers, particularly Republicans, are still hopeful that the administration’s economic proposals will ultimately become legislation that spurs economic growth.
According to TechnoMetrica, which does the polling, Americans’ declining confidence in the economy largely reflects a growing uncertainty over the fate of the administration’s pro-growth economic proposals, which continue to encounter political gridlock in Congress. In the wake of Donald Trump’s election victory, consumer confidence soared in anticipation of proposed tax reform, infrastructure funding, and other policies that Americans hope will create jobs and grow the economy. However, consumers’ great expectations have begun to cool, as the administration’s economic agenda remains stalled in Congress.
Further, the current health care debate has some consumers worried about the future status of their health insurance plans. Though many favor repealing the Affordable Care Act, a cloud of uncertainty hangs over the proposed replacement bill, especially in regards to its impact on individuals’ health insurance costs.
Consumers’ growing dissatisfaction with economic conditions may also be driven by the continual slow growth of the U.S. economy, and the subdued growth in workers’ wages.
Each month, the Economic Optimism Index provides comprehensive analysis of three key components: the Six-Month Economic Outlook, the Personal Financial Outlook, and the Federal Economic Policies components.
Six-Month Economic Outlook: The public’s short-term outlook for the economy dimmed in July, as the 6-Month Economic Outlook component dropped to its lowest level since the election. The reading declined by 2.8 points this month, to register a score of 48.4. July marks only the second month in 2017 in which the component has posted a score in negative territory. This decline largely reflects growing concerns over health care reform, and uncertainty regarding the status of President Trump’s pro-growth economic agenda. Unless sufficient progress is made on these fronts, consumers’ short-term economic outlook will likely wane further in the coming months.
Personal Financial Outlook: Despite the decline in Americans’ outlook for the overall economy, consumers reported greater confidence in their personal finances this month. The Personal Financial Outlook component gained 2.8 points in July to attain a robust score of 60. Americans’ brighter outlook for their financial situations can be attributed to a stronger U.S. labor market, as well as low gasoline prices.
Federal Economic Policies: Frustrated by Washington’s inaction on the administration’s pro-growth fiscal policies, consumers are growing increasingly dissatisfied with the federal government’s economic policies. The Confidence in Federal Economic Policies component fell 3.2 points in July, to a reading of 42.2, the second straight month of decline in the measure. Americans had expected Congress to move faster on tax cuts and infrastructure funding, but, so far, neither has been translated into legislation. The current congressional gridlock on health care reform is also driving down public satisfaction with the government’s economic policies.
In terms of demographics, 11 of the 21 segments that TechnoMetrica tracks each month posted Index scores in positive territory (above 50). In addition, only five groups showed improvement this month, compared to nine in June.
TechnoMetrica, based in Ramsey, N.J., said the study continues to find a significant gap in economic confidence based on party affiliation. Republicans, encouraged by President Trump’s pro-growth economic policies, remain highly optimistic about the outlook for the overall economy. Meanwhile, Democrats continue to hold a strikingly bleak view of economic conditions under the Trump administration.
