OpEd: An analyst looks ahead to how the US economy might fare under Trump
apnews.com

... President-elect Donald Trump won a return to the White House in part by promising big changes in economic policy " more tax cuts, huge tariffs on imports, mass deportations of immigrants working in the United States illegally.

In some ways, his victory marked a repudiation of President Joe Biden's economic stewardship and a protest against inflation. It came despite low unemployment and steady growth under the Biden administration.

What lies ahead for the economy under Trump? Paul Ashworth of Capital Economics spoke recently to The Associated Press. The interview has been edited for length and clarity.

Q: What kind of economy is Trump inheriting?

A: It is objectively a strong economy. But that doesn't mean the man in the street agrees. If you look just at the growth numbers, they've been strong, and the unemployment rate's pretty low. But consumer confidence remains muted. Although the inflation rate has come down, the level of prices remains much higher than it used to be. That was obviously weighing on consumer sentiment.

Q: What will be the economic priorities for Trump?

A: There's a lot to do on fiscal policy in terms of just extending the original Trump tax cuts, which are due to expire at the end of 2025. The debt outlook is approaching 100% of GDP and is on track to be 120% of GDP within another decade. Extending the expiring tax cuts is about avoiding fiscal tightening, not introducing additional stimulus into the economy. We're not convinced we'll see further stimulus. ...

It's not just vibes. Americans' perception of the economy has completely changed. (June 2024)
abcnews.go.com

... To piece this together, we downloaded a collection of economic indicators related to people's experiences of the economy from the St. Louis Federal Reserve " specifically, indicators relating to inflation, interest rates, work and wages, housing, and basic household finances. We then fitted a linear regression model using those indicators to look at how they were related to the University of Michigan Consumer Sentiment Index from 1987 to 2019 (basically, the "Before Times").*

This model tracks the Consumer Sentiment Index over that time period pretty closely.** Consumer sentiment as a trendline can be a bit spiky, as big news or economic shocks (such as the collapse of the housing market in 2008) can have dramatic effects that fade fairly quickly as the economy stabilizes. But other than these spikes, our model is fairly consistent at tracking the trends over the 32-year period preceding the pandemic.

Applying the same pre-pandemic model to consumer sentiment during and after the pandemic, however, simply does not work. The indicators that correlated with people's feelings about the economy before 2020 no longer seem to matter in the same way. As with so many areas of American life, the pandemic has changed virtually everything about how people think about the economy and the issues that concern them. ...

[then there is a good graph, worth viewing...]

Before the pandemic, a number of variables were statistically significant indicators for consumer sentiment in our model; in particular, the most salient variables appear to be vehicle sales, gas prices, median household income, the federal funds effective rate, personal savings and household expenditures (excluding food and energy). And some of these indicators have seen dramatic changes over the past four years, likely contributing to the disconnect between the positive economic news and Americans' continued economic pessimism. ...

Of course, that is only one view ...