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.”
Other
Factors
-
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.
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