US: Partisan tinge in the post-election surge in confidence - Nomura

Analysts at Nomura note that since the US election, businesses and consumers have reported, in a number of surveys, remarkable improvements in their outlook for the economy.

Key Quotes

The National Federal of Independent Businesses (NFIB) survey of small business optimism and the University of Michigan’s survey of consumer sentiment, both these indices have improved notably since the election in November.”  

“While sentiment has improved, economic activity has lagged. While the survey responses have improved notably, direst measures of economic activity have not accelerated.”

“These results raise a number of obvious questions. First, will this improvement in sentiment lead to higher spending? Second, how durable will this more optimistic outlook prove to be, particularly after Donald Trump becomes President and his policies become clearer and they begin to be implemented?”

“Implications

• There is no question that business and consumer confidence have surged since the election. What is less clear is what that means for the economy going forward. It is certainly possible that this surge in confidence will lead to acceleration in private spending.
• It certainly appears that Trump’s economic message has been compelling for many consumers and business leaders. However, the surge in economic confidence has come before any new policies have been clearly articulated or implemented. The incoming Trump administration has not (yet) laid out detailed plans for economic policy. Instead, President-elect Trump has stressed objectives rather than the means to achieve them. For example, Trump and his advisers have argued that they can generate a substantial acceleration of economic growth. But they have not offered specific policy proposals that might help to reach that goal.
• One consequence of the election is the end of divided government. The Republicans now control both houses of Congress and the White House. This simple fact may justify a significant improvement in confidence. Presumably, a reprise of the fiscal crises of 2011-13, which did so much to undermine consumer confidence, is now much less likely. Moreover, with a unified government, we can expect a robust fiscal response to any notable slowdown in economic growth.
• That said, we are about to transition to the time when Trump and the Republicans will be responsible for economic policy. If Trump and the Republican-led Congress do not take quick action, and if the economy does not quickly improve, this surge in confidence may prove to be fleeting.”