Post-election euphoria lifts US consumer confidence to 16-month high

WASHINGTON - US consumer confidence increased to a 16-month high in November amid optimism over the labour market, expectations for lower inflation and higher stock prices over the next year.

Part of the second straight monthly rise in confidence reported by the Conference Board think-tank on Nov 26 likely reflected the outcome of the Nov 5 election, which

returned Donald Trump to the White House

and gave his Republican Party control of the US Congress.

The Conference Board did not attribute the improvement to the election, but noted “that write-in responses about politics, including the November elections, surged to above 2020 levels”.

“The increase in the headline likely was driven by euphoria among Republicans,” said Mr Samuel Tombs, chief US economist at Pantheon Macroeconomics. “The index also jumped in late 2016, when Mr Trump was elected for the first time, suggesting that the sample of households in the Conference Board survey leans more Republican than the population at large.”

The Conference Board said its consumer confidence index increased to 111.7 in November, the highest since July 2023, from a revised 109.6 in October.

Economists polled by Reuters had forecast the index advancing to 111.3 from the previously reported 108.7.

The cut-off date for the survey was Nov 18. It mirrored a similar increase in the University of Michigan sentiment survey, which was skewed towards Republicans.

“November’s increase was mainly driven by more positive consumer assessments of the present situation, particularly regarding the labour market,” said Ms Dana Peterson, the chief economist at the Conference Board.

The rise in confidence was led by consumers under 35 years old. Confidence among those in the 35 to 54 age bracket fell slightly. It rose among all income groups, except for those with annual incomes of above US$125,000 (S$168,000) and consumers making less than US$15,000.

A record 56.4 per cent of consumers expected stock prices to increase over the next year.

Low inflation wish

Consumers’ average inflation expectations over the next 12 months dropped to 4.9 per cent, the lowest since March 2020, from 5.3 per cent in October. Nonetheless, high prices remain a concern, with consumers saying their top wish for the new year was lower prices. Frustration over inflation swept Trump to victory over Vice-President and Democratic Party candidate Kamala Harris.

There are, however, concerns that the President-elect’s economic policies could stoke inflation, and slow the pace of interest rate cuts in 2025.

Minutes of the Federal Reserve’s Nov 6 to 7 policy meeting published on Nov 26 showed officials appeared divided over how much further they may need to cut rates. The US central bank started lowering rates in September, having hiked them in 2022 and 2023 to combat inflation.

Trump on Nov 25 said he would impose a 25 per cent tariff on all products from Mexico and Canada, and an additional 10 per cent tariff on goods from China, on his first day in office.

Stocks on Wall Street traded higher. The dollar gained versus a basket of currencies, lifted by Trump’s tariff pledge. US Treasury yields rose.

The survey’s so-called labour market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, widened to 18.2 in November from 16.5 in October.

This measure, which correlates to the unemployment rate in the Labour Department’s monthly employment report, was boosted by the highest optimism about future job availability in almost three years. Economists were little concerned that fewer consumers planned to purchase big ticket items such as motor vehicles and refrigerators, noting the strong labour market optimism.

“This bodes well for our outlook that consumer spending growth will remain solid in the coming year,” said Ms Grace Zwemmer, an associate US economist at Oxford Economics.

Plans to buy a home over the next six months dropped sharply, likely reflecting a resurgence in mortgage rates and still-elevated house prices. A separate report from the Federal Housing Finance Agency showed house prices jumped 0.7 per cent on a month-on-month basis in September after rising 0.4 per cent in August.

The average rate on a 30-year fixed-rate mortgage soared to 6.72 per cent by the end of October from a more than 1½-year low of 6.08 per cent in late September when the Fed began easing policy.

Mortgage rates are tracking the rise in the 10-year US Treasury yields. The reversal in mortgage rates and hurricanes weighed on new single-family home sales, which plunged 17.3 per cent to a seasonally adjusted annual rate of 610,000 units in October, the lowest level since December 2022, a third report from the Commerce Department’s Census Bureau showed.

New home sales dropped 9.4 per cent year on year in October. The median new house price increased 4.7 per cent to US$437,300 in October from a year earlier. The inventory of new homes climbed to 481,000, the highest level since early 2008, from 471,000 units in September. That could curtail new construction.

At October’s sales pace, it would take 9.5 months to clear the supply of houses on the market, up from 7.7 months in September.

“Housing demand has been depressed by mortgage rates picking up again,” said Ms Alice Zheng, an economist at Citigroup. REUTERS