U.S. Economic Confidence Surges After Election

U.S. Economic Confidence Surges After Election

U.S. Economic Confidence Surges After Election

The FINANCIAL -- Americans' confidence in the U.S. economy increased sharply after the election, moving from a slightly negative evaluation (-10) to a slightly positive one (+3).

Gallup's U.S. Economic Confidence Index had been consistently negative throughout the year leading up to the election.

Gallup's U.S. Economic Confidence Index is the average of two components: how Americans rate current economic conditions and whether they feel the economy is improving or getting worse. The index has a theoretical maximum of +100 if all Americans were to say the economy is doing well and improving, and a theoretical minimum of -100 if all Americans were to say the economy is doing poorly and getting worse.

The index has registered positive only a handful of times over the nine years Gallup has tracked it daily -- the most recent being March 2015. For the week of Nov. 7-13, including two pre-election and five post-election days of interviewing, the index averaged 0.

The increase in economic confidence mostly stems from Republicans' more positive views after Republican Donald Trump won the election. Gallup has previously noted that Americans view the economy through a political lens. Republicans have had a dismal view of the economy -- especially of its future direction -- during Democratic President Barack Obama's two terms, according to Gallup.

Republicans' Economic Outlook Improves Substantially

After Trump won last week's election, Republicans and Republican-leaning independents now have a much more optimistic view of the U.S. economy's outlook than they did before the election. Just 16% of Republicans said the economy was getting better in the week before the election, while 81% said it was getting worse. Since the election, 49% say it is getting better and 44% worse.

Conversely, Democrats and Democratic-leaning independents' confidence in the economy plummeted after the election. Before the election, 61% of Democrats said the economy was getting better and 35% worse. Now, Democrats are evenly divided, with 46% saying it is getting better and 47% saying it is getting worse.

Republicans Less Negative About Current Economic Conditions

In addition to being more optimistic about the economy's future than they were before the election, Republicans are also slightly less negative about where economic conditions currently stand -- likely because they will have a Republican president in the near future. However, they remain negative overall about the current state of the economy under the incumbent Democratic president. It is likely that their view of current economic conditions will further improve, possibly into positive territory, when Trump takes office in January.

Republicans' current conditions component score has increased to -5, up significantly from -21 before the election. The latest score is the result of 21% of Republicans saying the economy is "excellent" or "good," and 26% saying it is "poor."

Democrats, on the other hand, have become more negative in their views of the current state of the U.S. economy, but the change is smaller among this group. Democrats' component score fell to +17 after the election, compared with +26 beforehand.

Bottom Line

The election of Trump has transformed the way Republicans and Democrats view the economy, particularly in their assessments of whether it is getting better or worse. But given the political and economic tumult of the past week, measures of the index in the coming weeks may be more indicative of U.S. economic confidence in the year ahead. On the one hand, global markets trembled on election night as Trump's victory became clearer. On the other hand, U.S. markets rallied later in the week, with the Dow Jones industrial average reaching a new high on Monday.

It's too early to say whether these are sustainable gains in confidence. But in the immediate future, Trump's victory has improved his party's confidence in the economy. Barring any major events, it is likely that Republicans will shift to a positive index score once the incoming president takes office, while Democrats' confidence will take a hit.