There has been a surge in consumer confidence since the election:
- The Conference Board Consumer Confidence Index jumped 6 points from October to November.
- The University of Michigan Index of Consumer Sentiment gained 5.6 points from October to November. Note: There was another 4.4 gain in December, taking the index to its highest reading since 2004.
- The Gallup U.S. Economic Confidence Index is skyrocketing – reaching a nine-year high of +8, versus a reading of -11 before the election. According to Gallup, the index has “been below zero nearly continuously since 2008.”
Likewise, there is heightened optimism in the business community:
- The stock market (DJI) is up more than 8% since the election.
- Some economists are predicting consecutive quarters of 4% GDP growth before too long.
- The OECD (Organization for Economic Co-operation and Development) says the growth rate of the economy will double by 2018.
Non-Economic Factors in Play
So what is going on here? There are several psychological and cultural factors that are impacting these occurrences:
- The Halo Effect
This says that people project their positive feelings about one aspect of a person onto many other traits regarding that person. In this case, if the winner of the election is perceived as intelligent, competent, and/or capable, then there is a belief that his policies will be likewise. (There is a reverse-halo effect too, as you may have read.)
- The Winner Effect
General George Patton once said, “Americans love a winner and will not tolerate a loser.” Our culture puts a high value on winning. That’s why we are so sports-crazed, and why losing candidates have problems running again and winning. This time we have a very vocal winner espousing a “winning” message, creating increased optimism.
- The Sticker Effect
(This one I made up, and it is related to the Halo Effect and the Winner Effect.) A person will project onto a winning candidate all the positive things the person believes in and wants accomplished. “This elected official believes in the same things I do and will be able to change things the way I want them changed.” There can also be negative stickers. “This elected official is against everything I believe in and will make everything much worse.”
- We have just completed the longest, roughest, and wildest campaign of our lifetimes. Some people are feeling better about things because the election is over and there is less uncertainty. This would have happened to some degree regardless of the outcome.
- President-elect Trump has more business experience than any POTUS in history. Many (including some economists) are expecting that experience to translate into a much stronger economy. It must be remembered, this result is not guaranteed. We are in new territory here, and the economy is never that easily controlled. Regardless, the new administration can be categorized as “pro-business”
A Pseudo-Economic Factor
- Animal Spirits
This is a John Maynard Keyes term for when economic decisions are made instinctively or emotionally. It is often used when economists lack a rational or standard explanation of what’s happening in the economy or stock market. Apparently some positive animal spirits have been stirred by this election.
What About Business Confidence?
I expect the new surveys on business confidence to show significant increases also, for the same reasons listed above. However, due to the sticker effect, when the president-elect talks about reducing regulations, many business people hear this: “All the regulations I don’t like will be repealed, and all pending regulations will be cancelled.”
Existing business regulations that inhibit business competiveness and efficiency are vulnerable for elimination. Those dealing with safety factors are more likely to survive. Environmental regulations will be subject to review. I would expect all pending regulations to be put on hold and then reexamined.
The Impact on the Trucking Industry Regulations
Expect all pending regulations to be put on hold pending further review. However, regulations involving safety factors will probably be enacted in some form after review. Regulations that limit the ability to compete, or be efficient, may get dropped or changed. The Electronic-Log-Device probably moves ahead since implementation has already started, it is a safety rule, and it does not implement a new standard, it merely uses technology to insure better compliance with a current standard.
What Happens to The Economy in 2017?
President-elect Trump’s economic plan was regarded as average at best, and disastrous at worst, during the campaign. Now, some economists believe it is brilliant. Of course, it is not as bad as described in the past, and probably not as good as the confidence factors indicate now. In addition, it will take some time for the plan, if it works, to have a real positive impact.
Will consumers and businesses translate the current euphoria into greater economic growth? Are we entering into another “Era of Good Feeling”? A positive shot of confidence can influence consumer and business behavior, but we have not been in this situation since Hoover was elected in 1928 and the economy can be a very fickle thing.
Currently, the economy is sending very mixed messages. The big-picture, macro, numbers have been looking good. However, the on-the-ground view in Ohio is flashing warning signs. There have been announcements of plant closings and layoffs. Tax revenue for Ohio in November (a real, not estimated, figure) was 5% under estimates. Numbers like that usually happen during recessions. Present conditions are starting to remind me a little of December 2008. Hold on econo-fans, this could be a wild 2017.
This post first appeared on the FTR website. FTR is the leader in analyzing and forecasting the commercial transportation industry. For more information on FTR reports and services, please click here.)