Optimism about household finances surged to a multiyear high after Donald Trump’s victory in the presidential election in November, as per a New York Federal Reserve survey released on Monday.
The survey of around 1,300 heads of households revealed that 37.6% of households expected their financial situation to improve in the next year, marking an increase of approximately 8 percentage points from October. This was the highest level recorded since February 2020, just before the onset of the Covid-19 pandemic.
Conversely, the percentage of households anticipating a deterioration in their financial situation decreased to 20.7%, down nearly 2 percentage points from the previous month and the lowest level since May 2021.
The survey results came after Trump’s re-election on November 5, securing a second term in the White House. The Republican leader has pledged to implement measures such as lower taxes and deregulation to stimulate economic growth.
Despite the overall positive economic performance until 2024, consumers continue to face challenges due to rising prices, leading to a cumulative increase of over 20% in the consumer price index inflation gauge during President Joe Biden’s term.
Although consumer sentiment has improved, the survey by the New York Fed indicates that consumers remain cautious about inflation. Expectations for inflation over the next one, three, and five years all rose by 0.1 percentage point, reaching 3%, 2.6%, and 2.9%, respectively. The Federal Reserve aims for a 2% inflation rate but is anticipated to reduce its benchmark interest rate by a quarter percentage point at its upcoming meeting.
While Trump has not focused much on addressing the government’s debt and deficit burden, the outlook in this area has also improved. The median expectation for growth in government debt stood at 6.2%, a decrease of 2.3 percentage points from October and the lowest level since February 2020.
