After two years of sustained growth that far exceeded expectations, household and business sentiment is beginning to be affected by president Trump’s statements on tariffs. Consumers are anticipating a more inflationary environment and are seeing their job prospects worsen, as indicated by surveys from the University of Michigan and the Conference Board respectively.

That said, in recent years the US economy has shown a resilience that has often surpassed the prevailing pessimism among consumers and entrepreneurs. Is this still the case today?

If real-time growth indicators are anything to go by, the answer is yes. According to the nowcasts (real-time estimates of economic growth, incorporating new data as they are published) from the Fed’s regional branches in Atlanta and New York, growth is estimated at 2.3% and 2.9% respectively. These levels remain solid and above the long-term trend.

Politicised confidence indicators

It should be remembered, however, that economic sentiment can be influenced by everyday factors which, although visible, are not always representative of the economy as a whole. A striking example is the recent spike in egg prices due to bird flu. This type of phenomenon, although relatively anecdotal in the overall consumer basket, tends to affect household inflation expectations disproportionately.

Moreover, these confidence indicators reflect the extreme polarisation of American society. Unsurprisingly, Republican consumers have been more optimistic since Trump’s election, while Democrats are more worried about growth and inflation. This dichotomy can also be observed among small business owners, who are generally closer to Republicans: although the fundamentals of their businesses have not changed significantly, their optimism rose sharply after Donald Trump’s election victory.

Are concerns about consumer spending starting to materialise? It’s true that real consumption (adjusted for inflation) fell by 0.5% in January compared with December, but we shouldn’t forget that it had risen sharply the previous month (+0.8%). In addition, unfavourable weather conditions may have played a role. At the same time, incomes rose by 0.9% (against expectations of 0.4%), pointing to a still buoyant consumer environment, especially as the unemployment rate remains low.

Aykut Efe is economist & strategist at Spuerkeess Asset Management.

This article was originally published in .