U.S. President-elect Donald Trump’s Victory Boosts Household Finances Outlook to Multiyear High
Optimism about household finances has hit a multiyear high, following Donald Trump’s presidential election victory in November, according to a New York Federal Reserve survey released on Monday. The survey, which polled approximately 1,300 heads of households, found that households expecting their financial situation to be better a year from now jumped to 37.6%, an 8 percentage point increase from October and the highest reading since February 2020, just before the Covid-19 pandemic.
In conjunction with the rise in optimism, the level of those who expect their financial situation to get worse fell to 20.7%, down nearly 2 percentage points from a month ago and the lowest since May 2021. The results follow Trump’s November 5 victory, which will send him back to the White House for a second, nonconsecutive term. The Republican has promised a menu of lower taxes and deregulation to boost growth.
Despite the solid macroeconomic growth of 2024, consumers have been stymied by price increases that have spurred a cumulative increase in the consumer price index inflation gauge of more than 20% under President Joe Biden. However, even with the increase in sentiment, consumers’ inflation outlook remains cautious, according to the New York Fed survey. Inflation expectations at the one-, three-, and five-year horizons all increased 0.1 percentage point, rising to 3%, 2.6%, and 2.9%, respectively.
The Fed targets inflation at 2%, but is expected to lower its benchmark interest rate by a quarter percentage point when it meets next week. Moreover, the outlook on government debt has also improved, as the median expectation for growth in government debt was at 6.2%, down 2.3 percentage points from October and the lowest level since February 2020.
