Stay Connected

Our News Centre and Blog is your link to a dynamic network of information, people, and ideas curated by our FX and payments experts.

Market Wire
Consumers’ Economic Expectations Rise in the US

Jay Brahach December 11, 2020

The University of Michigan’s preliminary Consumer Sentiment index saw an intriguing gain this morning, beating expectations by 4.3 percentage points to come in at 81.4.

This comes despite the increased in COVID-19 cases across the US, with more than 3,000 deaths reported on Wednesday this week, the highest death total for a single day anywhere.

Consumers, however, appeared to focus on the positive news with regards to COVID-19 vaccines.

The FDA is expected to approve the Pfizer-BioNTech vaccine in the next two days, with the goal of delivering vaccines to the most vulnerable by early next week. Tying in with this narrative, consumers are looking at the US economy more favorably in the long term, with the index for Consumer Expectations increasing 4.2 percentage points from November. While this gain is somewhat surprising, it can largely be attributed to a shift in economic prospects along partisan lines on the back of the Biden’s election victory.

Taking the last five months into account, economic expectations rose by 39.5 points among Democrat voters, while Republican economic expectations decreased 34.9 points. The overall shift in expectations as a result is very much political, with self-identified independent voters assessing the economy at the same levels as of March this year.

As we head into the Christmas period, it feels as if the headline figures in this report could be somewhat misleading, hence the limited movement trade-weighted US dollar index upon this data release.

Job losses and income decreases are still widely expected in the short term, and vaccine roll-out is still going to take time to come into effect. Americans are eagerly anticipating a federal relief package, but discussions have been extended for another week. In any case, it is unlikely these payments will reach households by the end of the year.

The Christmas spirit appears to be elevating Americans’ moods somewhat this December, but absent a coherent federal relief package, the January hangover could be a rough one.

 

Jay Brahach
Account Executive and Currency Analyst

-->