Saturday, February 15, 2020

Positive Consumer And Business Sentiment Creating A Tailwind For Future Economic Activity

One area that remains favorable is the confidence of the consumer and small business owner. In this week's release of the NFIB small business Optimism Index, optimism rose 1.6 points to 104.3. The survey notes six of the ten components rose, two were unchanged and only two declined. Small business owners' sales and earnings expectations improved significantly, sales up seven points and earnings trends up five points. With respect to the consumer, Friday's University of Michigan Consumer Sentiment Index rose 1.1 points to 100.9. The report noted this level is near the expansion peak reading of 101.4 reached in March 2018. Also important, is the "Expectations Index, the main gauge of future economic conditions, rose to 92.6, also its second highest level in this long expansion."

Another measure that gauges the the sentiment consumers is found in Gallup's annual Mood of the Nation survey. In the report released a little more than a week ago, the survey notes a record 59% of  Americans indicate they are financially better off than they were a year earlier.

Looking ahead, Gallup ask Americans expectations about their financial picture in the year ahead. Gallup notes the response to this question, "Americans are also expressing peak optimism about their future personal financial situation. About three in four U.S. adults (74%) predict they will be better off financially a year from now, the highest in Gallup's trend since 1977." 

With the consumer accounting for 70% of economic activity, a consumer that has a favorable view of their future financial picture is likely a positive for future financial and economic activity. An optimistic small business community is supportive of favorable employment markets. Combined these favorable sentiment measures are tailwinds for economic activity in the year ahead.

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