As noted earlier, Consumer Confidence handily exceeded expectations in July. Digging a little deeper into the details, however, we found some interesting trends in confidence levels based on income levels and age. Starting with income, every income level has seen a boost in confidence since the election last November, but while sentiment is off its peak for consumers with higher and lower incomes, those with incomes in the middle ($35-$50K) saw their level of confidence rise to a new cycle high of 123.3 in July. That was the best reading since June 2001. Trump campaigned in support of the forgotten man, or those Americans right in the middle who seemingly receive little in the way of benefits but are still scrambling to get by, and based on July’s data, they don’t feel as forgotten.
In terms of how age has impacted confidence levels, we have also seen some notable shifts. While consumers with incomes right in the middle of the income spectrum have seen the biggest boost to sentiment since Trump was elected, it has been the oldest Americans that it has had the most positive impact on. As shown in the red line below, confidence among Americans over 55 surged after the election and is currently closer to its cycle-high than any other age cohort. Meanwhile, consumers under the age of 35 actually saw their confidence level decline in July. So what’s behind the different shade of glasses that different age groups are viewing the economy by?
In a word, Trump. The chart below shows the spread in Consumer Confidence among consumers under the age of 35 and those over 55 on a six-month moving average basis in order to smooth things out. Because younger consumers have their whole life ahead of them, they are naturally more optimistic than older consumers who have likely reached and surpassed their peak earnings years. But the chart below shows how in the last eight years the spread really widened to levels not seen in decades.
While a lot had to do with the fact that the economy was doing well, a big contributing factor was also the administration of Barack Obama, who for most younger Americans attained rock star like status. The shaded region in the chart shows the period from when Obama was first elected in November 2008 through the election of Trump in November 2016. Almost to the month when Trump was elected, confidence among younger Americans stalled out, while older Americans viewed the election as a new period of – to borrow a phrase from the Obama campaign – hope and change. In fact, at the current level of 20.25, the six-month average spread has dropped to its lowest level since June 2010!