President Trump’s election was followed by a massive surge in confidence about the U.S. economy. Just about everyone — small business owners, big business executives, investors and consumers — was more upbeat, according to numerous polls and surveys of sentiment.
But the euphoria is starting to fade. It could be a big problem for Trump, who promised his base a turbocharged economy.
Small business optimism is on the decline. The latest NFIB Small Business Optimism Index for June came out Tuesday and was lower than expected. The National Federation of Independent Business blamed “the mess in Washington” for the pullback.
“Small business optimism has been flying high for months based on the expectation that Congress will cut taxes and reform health care. Washington has not delivered,” the NFIB wrote. It’s a far different tone than the NFIB’s hopeful report in January when the index hit a 12-year high.
The disappointing small business report comes on the heels of a sharp drop in the Gallup polling data on how people feel about the economy. Every day Gallup asks 1,500 American adults to grade the economy today and then say whether they think it will get better or worse in the coming months. The Gallup data recently hit the lowest point so far in Trump’s presidency.
Gallup’s Daily Economic Confidence Index plunged to -7 on June 30, and the Weekly Economic Confidence Index fell to 0 on July 2. The indexes have rebounded a little since then, but sentiment about the Trump economy is still barely positive.
The biggest pullback in sentiment has come from people's responses to questions about whether they think the economy will improve down the road. In other words, optimism about a Trump boom appears to be slipping.
Trump campaigned as a master businessman who could unleash faster growth and create millions of jobs. His message resonated. In poll after poll from CNN and Fox, voters said they trusted Trump more than Clinton on the economy. Even when Trump’s overall poll numbers dipped to around 40 percent, voters still gave him high marks on the economy — with approval typically above 50 percent.
Now that Trump is president, there aren’t as many polls asking specifically about Trump (the latest one from Fox showed 48 percent approval of Trump's handling of the economy in June). Instead, we get a lot of data like the Gallup and NFIB surveys that ask people how they feel about the U.S. economy overall.
Regardless of whether Americans blame Trump, any souring of public economic sentiment makes his job harder.
Trump promised a big jump in jobs and economic growth that's well above the 2 percent a year that Obama achieved. To get that, the president needs businesses and consumers to spend more. They won’t do that if they aren’t feeling good about the direction that things are headed.
“The fact that sentiment is nose-diving is not helpful to the prospects for future employment or capital investment,” says Peter Atwater, president of Financial Insyghts and author of the book “Moods and Markets.”
As families and CEOs become more gloomy — or even just lukewarm — about the future, it makes them more likely to keep their wallets closed. It’s telling that the biggest drivers of the pullback in small business and consumers sentiment is that fewer and fewer people believe the economy is going to get any better.
“Bottom line, it’s clear that the rise in business confidence whether from small, medium or large businesses post-election has just not translated into a pick up in business activity as seen in the actual data,” says Peter Boockvar, chief market analyst at the Lindsey Group, an economic advisory firm.
This doesn’t mean the economy is going to fall off a cliff. Most people still feel better about the U.S. economy now than they did at this point last year. (The notable exception is Democrats. Their confidence has fallen sharply since the election, according to the University of Michigan's Consumer Sentiment Index).
But the latest data are problematic for a president who promised spectacular growth that would “get the economy back on track.”
So far, the economy Trump is touting as president looks similar to the one he loathed as a candidate.