Confident U.S. Consumers Shrug Off Trump Impeachment Saga—But Coronavirus Fears Loom

American consumers were still growing in confidence in February, according to a closely-watched confidence index reporting its first survey results since the conclusion of President Donald Trump's impeachment trial. But as a political risk to the economy faded, the coronavirus global health threat intensified.

The Conference Board's Consumer Confidence Survey hit 130.7 in February, up slightly from 130.4 in January as Americans shrugged off the impeachment saga that hung over voters since the president's alleged misconduct first emerged publicly in September. But the reading was shy of the 132 that analysts were forecasting.

The Present Situation Index, which is based on consumers' assessment of current business and labor market conditions, decreased from 173.9 to 165.1 in February. The Expectations Index, based on consumers' short-term outlook for income, business and labor market conditions, increased from 101.4 to 107.8.

"Consumer confidence improved slightly in February, following an increase in January," said Lynn Franco, senior director of economic indicators at The Conference Board.

"Despite the decline in the Present Situation Index, consumers continue to view current conditions quite favorably. Consumers' short-term expectations improved, and when coupled with solid employment growth, should be enough to continue to support spending and economic growth in the near term."

The index is compiled each month by insights firm Nielsen on behalf of nonpartisan think tank The Conference Board. Data for this preliminary release is collected until the middle of the month, meaning some respondents reported their sentiments after Trump's trial.

Survey respondents who reply later than the cut-off are included in the final report published a month later. The survey tracks consumer sentiment each month, taking in their views on business and employment conditions, income, household spending, and more.

The U.S. Senate acquitted Trump of both impeachment articles on February 6. The House impeached Trump with abuse of power and obstruction of Congress over the alleged scheme to coerce Ukraine to interfere in the 2020 election and benefit his re-election campaign.

Though the chances of the Republican-majority Senate convicting and removing Trump were small, the threat was real and such a dramatic step would likely have triggered political and market instability at least in the short-term, perhaps longer.

At a headline level, the U.S. economy is strong. Employment numbers are hitting record highs, GDP growth came in at a robust 2.1 percent in the third quarter of 2019, inflation is low and stable, and beyond the day-to-day volatility, the stock markets maintain their overall upward trend.

"The good economy likely overrides the impeachment issue," said Mike Cosgrove, principal at Econoclast. "Homeowners feel good as housing prices continue their march upward, unemployment is low and the low interest rates mean borrowing costs are low."

Mickey Levy, chief economist for the U.S., Americas and Asia at Berenberg Capital Markets, said the impeachment drama had "no impact" on consumer confidence.

"Consumers didn't care and didn't pay attention," Levy said, adding that they are focused on things that affect their finances directly, such as labor market prospects, wages, interest rates, oil prices, and so on. "The impeachment trial didn't even measure as a blip on the confidence radar screen."

What is of greater concern is the coronavirus outbreak tearing through China and spreading across the world in what the World Health Organization has declared a global health emergency. It may yet be declared a pandemic.

The latest data compiled by Johns Hopkins University in its coronavirus tracker has 80,248 confirmed cases all over the world. The vast majority—77,660—are in mainland China.

Other affected countries include South Korea, Italy, Japan, Singapore, Iran, and the U.S., among many others. There have been 2,703 deaths so far and 27,747 recoveries. In the U.S. there are 53 confirmed cases and no deaths.

"The conclusion of the impeachment trial should have little effect on consumer confidence–opinions were solidified well before the trial began and the acquittal was essentially a foregone conclusion," said Yung-Yu Ma, chief investment strategist at BMO Wealth Management.

"Given the mid-month data cutoff, it will be important to consider whether potential coronavirus effects had an early impact on consumer confidence. Since the U.S. is well-removed from the front lines of the outbreak, hopefully the answer is 'no,' but we cannot completely dismiss this possibility either."

Padhraic Garvey, head of global debt and rates strategy at ING Financial Markets LLC, said consumer perception of coronavirus's impact on job security because of its disruption to global supply chains—many Chinese factories have closed, for example—may feed into future confidence trackers.

"This week's consumer confidence reading is unlikely to capture a significant downdraft just yet, but next months' could begin to see some creaking in confidence, and especially should the panic seen on equity markets today persist in the coming weeks," Garvey said.

A Gallup poll released last week found that 65 percent of U.S. adults thought the coronavirus would have a very or somewhat negative effect on the global economy, with the remainder believing there would be no negative effect.

But only 36 percent were very or somewhat worried about the coronavirus. The rest were either not too worried or not worried at all. The 1,028 adults across the U.S. were polled by telephone between February 3-16.

Global markets took a dive on Monday amid fresh concerns that the coronavirus will drag down the world economy.

The New York City-based Dow Jones and S&P 500 indices suffered their worst declines since 2018, BBC News reported, and the Nasdaq was also down. Outside of the U.S., the U.K.'s FTSE 100 index saw its sharpest drop in four years and in Japan, the Nikkei 225 slid.

"There has been so much complacency in recent weeks from investors, despite clear signs that China's economy is facing a large hit and that supply chains around the world were being disrupted," Russ Mould, investment director at AJ Bell, told the BBC.

"Markets initially wobbled in January but had quickly bounced back, implying that investors didn't see the coronavirus as a serious threat to corporate earnings. They may now be reappraising the situation."

coronavirus economy consumer confidence trump impeachment
A pedestrian wearing a face mask walks past a monitor displaying stock information outside a securities firm on February 25 in Tokyo, Japan. The Nikkei index dropped more than 3.5 percent at the open on Monday as global concerns grow about the economic impact of the Coronavirus. Tomohiro Ohsumi/Getty Images