In an enlightening review of consumer sentiment, the December 2024 SCE Public Policy Survey reveals striking shifts in public policy expectations among households. Consumers now perceive a heightened likelihood of tax reductions and cuts to various transfer programmes, while the expectations for tax hikes and expansions in entitlement initiatives have diminished significantly. Yet, these substantial shifts have not markedly swayed median households’ short-term economic expectations, nor have they influenced individual prospects for income and spending growth.
This exploration into consumer beliefs demonstrates how their perceptions of future economic developments are intricately linked to their consumption and employment decisions. Events such as electoral outcomes appear to play a pivotal role, influencing perceptions around governmental policies and their broader economic impacts. The optimism stemming from knowing a winning party can resonate differently, particularly among those who supported the victors in the elections, affecting overall consumer confidence.
Investigating the SCE Public Policy Survey results reveals dramatic changes in expectations regarding taxes and social programmes from August to December 2024. Notably, the average perceived likelihood of a decrease in the highest income tax rate surged from 14.9% to 40.3%, whilst expectations for an increase fell from 40.6% to 19.4%. Similarly, anticipated cuts in the capital gains tax rose significantly, indicating a collective shift in consumer optimism towards lower tax rates.
Furthermore, the data indicates a notable shift towards anticipating cuts in federal assistance programmes. For instance, expectations around federal welfare benefits declining jumped from 13.8% to 40.8%, marking the highest sentiment recorded. This pattern continued with expectations of reduced student debt relief, underscoring a broader trend away from programme expansions.
Aligning with these expectations are declines in the anticipated growth in personal taxes and government debt. Households predict a median tax payment growth of just 3.0% for the coming year, alongside a drop in expected government debt growth from 8.5% to 5.9%. Thus, a clear narrative emerges: while consumers anticipate favourable policy changes regarding taxes, their overall economic outlook remains stabilised, showing little variation in inflation, home prices, or earning growth.
The December 2024 SCE Public Policy Survey exhibits significant consumer shifts towards expecting tax cuts and reductions in transfer programmes, while expectations for tax hikes have declined. Despite this optimism, households’ near-term economic forecasts for their income and spending remain unchanged. Overall sentiment indicates a stabilisation of expectations concerning broader economic conditions.
In summary, recent shifts in consumer expectations highlight an anticipation for tax cuts and reductions in government assistance programmes. While households express optimism regarding public policy changes, these developments appear not to have significantly altered expectations concerning the overall economy or individual financial growth. As consumers adjust their outlook towards potential fiscal improvements, their near-term economic forecasts remain remarkably stable.
Original Source: libertystreeteconomics.newyorkfed.org
