Recession fears recede in boost to Trump

After a summer dip, consumer spending has roared back to life heading into the holiday shopping season, giving the stock market a boost and fending off recession fears with less than a year until the 2020 elections.

The improving economic picture could be a boon for President Trump, who has made the economy a central argument for his reelection.

Recent economic data stands in contrast to just a few months ago, when economists were worried that consumer spending would be the next shoe to drop after manufacturing hit a slump and as investment was in the midst of contracting.

The tumultuous summer was also marred by a rocky stock market, escalating trade tensions with China and repeated warning signs from the bond market that a recession could be on the 2020 horizon.

By the time fall rolled around, analysts were forecasting flat or even decreasing sales for Halloween, a further sign of declining consumer sentiment.

But sales beat expectations, raising prospects for the all-important holiday shopping season.

“Consumers are in good financial shape and willing to spend a little more on gifts for the special people in their lives this holiday season,” said National Retail Federation President and CEO Matthew Shay.

Consumer confidence has also bounced back, according to a daily tracking poll by Morning Consult.

The survey found consumer sentiment on the rise for four consecutive weeks, with Americans feeling better about how the economy is doing right now and where it is headed.

“Consumers are finally acknowledging that consistent — albeit moderate — wage inflation and steady job gains combined with subdued price inflation have made them financially better off than they were 12 months ago,” Morning Consult wrote in an analysis of the polling data.

Wall Street analysts have seen signs of optimism in other parts of the economy as well. A recession forecast model from S&P Global lowered expectations of a downturn in the coming year.

“Our recession model, which is based on key financial market indicators up to mid-November, indicates that the probability of a U.S. recession starting in the coming 12 months has moved down to 30 percent. The probability of recession risk based on this model was 35 percent in August,” said Beth Ann Bovino, the company’s chief U.S. economist.

The economic news is likely to benefit Trump. Despite the effects of his ongoing trade war with China and criticism over the high cost and uneven benefit of the 2017 tax-cut law, the economy has proven resilient. And Trump has taken notice.

“Another new Stock Market Record. Enjoy!” he tweeted Monday as markets notched further gains.

But not all aspects of the economy are surging. Economists expect growth to slow for 2019 overall. Forecasts from the Conference Board estimated that gross domestic product would expand 2.3 percent this year and then 1.9 percent in 2020 after last year’s 2.9 percent growth — all below the 3 percent growth Trump promised on the campaign trail.

Trump has also yet to finalize even a preliminary deal with China to scale back the trade war. There are also doubts that a more substantial second round is possible.

But with consumers feeling buoyant — low unemployment and wages showing signs of growth — the economic winds are at Trump’s back heading into 2020.