Americans are worried Trump's tariffs and the government shutdown will hurt the economy

Win McNameeAmericans are worried that President Donald Trump’s tariffs and the government shutdown will hurt the economy.
  • The University of Michigan’s consumer-sentiment index fell to 90.7 in January, well below expectations of 96.4.
  • It was the lowest consumer-confidence reading since October 2016.
  • Americans cited the government shutdown, President Donald Trump’s tariffs, and the recent stock-market sell-off as reasons for their worries.

Americans are starting to get worried about the future of the US economy, and they’re listing President Donald Trump’s policies as a big part of their concerns.

The University of Michigan consumer-sentiment index fell to 90.7 in January, down from 98.3 in December and the lowest reading for the index since October 2016. The index also came in well below economists’ expectations of 96.4.

The forward-looking consumer-expectations index, which asks people about their view of the economy in the year ahead, sank to its lowest level since mid-2014.

According to Richard Curtin, the chief economist of the survey, recent policy changes in Washington, DC, contributed to the fall in consumer confidence.

“The loss was due to a host of issues including the partial government shutdown, the impact of tariffs, instabilities in financial markets, the global slowdown, and the lack of clarity about monetary policies,” Curtin said in a press release.

Read more:
The government shutdown has gotten so bad that agencies are using legal loopholes to restart critical functions

Following the election of Trump, Republicans’ outlook on the economy soared – pulling up the whole index. But that sudden upswing in prospects is starting to fade, dragging the index with it.

As an example of concerns about Trump and the government, fewer people are telling the Michigan surveyors about the positive effects of policy. The per cent of respondent making positive comments on government economic policy fell below 10% for the first time since Trump’s election.

“Consumers judged recent news as the least favourable they had heard about the economy since late 2011,” Curtin said. “Negative references to government policies were cited nearly four times as frequently as positive mentions. These negative references included the shutdown and taxes, both mentioned by about one-in-ten, and tariffs, mentioned by 30%.”

While the sentiment drop is certainly worrying, Curtin said the survey did not reveal all bad news. The relative strength of Americans’ personal finances helped to blunt the otherwise glum report.

“While the January falloff in optimism is certainly consistent with a slowdown in the pace of growth, it does not yet indicate the start of a sustained downturn in economic activity,” he said. “It is the strength in personal finances that will continue to support consumption expenditures at favourable levels in 2019.”

Thomas Simons, the senior money-market economist at Jefferies, also took a positive spin on what was a bad report. Simons cited the temporary nature of many of the problems cited in the report.

“The equity market volatility that prevailed throughout December seems to have moderated, the ongoing government shutdown will eventually be resolved (we think), and concerns about the Fed raising interest rates too quickly has abated due to their recent talk about exercising ‘patience’ and characterising rates as currently being close to neutral,” he said.

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