Consumer sentiment in the US is riding high on a tide of good economic news, despite political turmoil at home and inflamed geopolitical tensions abroad.
Analysts said consumers remain confident despite catastrophic storms, deepening political alienation, violent marches and talk of war — things that might otherwise make households cut spending and hunker down for safety — because such events are far from their day-to-day economic lives.
“In the past year, there has been a long list of issues that could have derailed consumer confidence, including the unprecedented partisan divide, North Korea, Charlottesville, as well as the hurricanes,” University of Michigan Surveys of Consumers chief economist Richard Curtin said on Friday in a statement.
Curtin released the university’s twice-monthly index of consumer sentiment, which slipped 1.6 points between August and last month, but remained elevated, even though three hurricanes had struck US territory in the space of a month.
“Confidence has nonetheless remained very favorable,” he said.
In the first nine months of the year, the index even hit its highest level in 17 years.
“One of the reasons Americans can be optimistic is the extent to which many of these events have not affected what they are able to do and what they are not,” Princeton University sociology professor Frederick Wherry said.
The deadly violence at a far-right march in Charlottesville, Virginia, in August was “not a major enough event to influence the national psyche or interrupt economic trends,” said Edward Berkowitz, professor of history and public policy at George Washington University.
Consumers do have reasons to be optimistic. The economy grew by 3.1 percent in the second quarter, its fastest pace in nearly two years, and unemployment, estimated at 4.4 percent, is at historically low levels.
The economic devastation of Hurricane Harvey, which slammed into Florida and Southeast Texas in a two-week period, “was quite small and has already begun to fade,” Curtin said, adding that for the fourth straight month, consumers also reported improving personal finances.
Two-thirds of homeowners surveyed also reported rising property values, the highest level in ten years.
“Historically, people enter the marketplace as a place for practicing our freedom,” Wherry said. “The marketplace becomes a refuge for us here in the US.”
Confident consumers with rising incomes spend more. Consumer spending is a prime driver of growth in the world’s largest economy and Curtin estimates it will grow by 2.6 percent this year and in the first half of next year.
Consumer sentiment surveys were narrowly focused and should not obscure broader public opinion, said Tom Smith, of the University of Chicago’s National Opinion Research Center.
“Given the objective economic situation and the narrow focus of the measures you mention, I am not surprised that they had generally been positive,” he said. “But the other measures tell us that these consumer confidence measures are only part of the larger picture.”
Meanwhile, US society is becoming increasingly unequal.
A Federal Reserve survey published on Wednesday said income and wealth concentrations are now at “historically high” levels.
The top 1 percent of households now owns nearly 40 percent of all US wealth, while the bottom 90 percent has seen its share decline steadily for 25 years.