(Dec 3): Surveys since Donald Trump’s election victory show American companies are growing more upbeat about their prospects in anticipation of more pro-business policies and less regulatory burden.
From factory floors to construction sites, optimism in various regional Federal Reserve bank surveys represents another chapter in the “Trump Bump” that began with a stock market rally following the Nov 5 election, delivered a stronger dollar and supercharged Bitcoin prices.
The more sanguine view from the trenches stands in contrast to that of many Wall Street economists, who expect cooler growth amid trepidation about the economic fallout from tariffs Trump has threatened to impose on imported goods.
“Clearly the business community grabbed onto the Republican win, and they’ve kind of looked at the inflation potential as something we’ll deal with in the future,” Timothy Fiore, chair of the Institute for Supply Management’s (ISM) Manufacturing Business Survey Committee, said on a conference call on Monday.
It may take some time for business sentiment to translate into actual results, especially as the Fed seems poised to begin taking a more gradual approach to interest-rate cuts in the months ahead. The latest ISM survey results published on Monday showed that while manufacturing activity remains weak, a pickup in orders and comments from some industries suggest the industry is stabilising and in a position to expand early next year.
‘Very positive’
“It sounds like there’s going to be a bit of money put into the economy, there’s going to be some regulations cut, and we’ll see what that does to the business environment. But overall, the panelists are really perceiving this to be very positive,” Fiore said.
Results of several Fed manufacturing surveys published since the election have captured that feeling. The New York Fed’s Empire State manufacturing index surged in November by the most since June 2020, when the economy was emerging from the onset of the pandemic.
Subsequent reports revealed factories and service producers expressing the most optimism in years towards the short-term outlook for capital spending, sales and general business activity.
A survey of manufacturers in the Philadelphia Fed’s district showed the outlook for business activity and orders advanced to the highest levels since mid-2021. In the Kansas City Fed region, six-month expectations and the outlook for capital spending were the strongest since 2022.
Producers in Texas, meanwhile, were more upbeat about business activity than at any time in the last three years.
Texas manufacturers on the Trump Bump
- “We are delighted at the election outcome and expect this to be very good for our business.” — Computer and electronic products
- “Hallelujah, the election is over, the results were unquestionably solid, work can be done, and attitudes are seemingly much improved. I do believe that six months from now we will prove to be at full throttle.” — Machinery
- “Our outlook six months forward is for very slow improvement, but that outlook is uncertain due to risks of tariffs and the potential impact on global demand.” — Chemicals
- “Longer term, the outcome of the election should benefit all US businesses once policy is corrected and consumer confidence increases.” — Chemicals
- “We do think the Trump administration will be healthy, particularly after the cabinet heads settle in, and free enterprise supported by domestic tranquility and the common defence become the norm.” — Food
The brighter manufacturing outlook is shared by service providers, which make up the largest part of the economy. Expectations among non-manufacturing industries in the Philadelphia Fed district as well as in Texas climbed to the highest levels since 2021.
In the area covered by the Richmond Fed, services revenue expectations advanced to the highest in data back to 2011, while a gauge of the demand outlook improved to a more than three-year high. Anticipated capital expenditures also improved.
Even US homebuilders are expressing more optimism about the potential for a more friendly business climate. While still-elevated borrowing costs and high asking prices continue to hamstring the housing market, expectations that the Trump administration will ease regulatory burdens helped drive a National Association of Home Builders/Wells Fargo index of industry sentiment to a seven-month high in November. An index of sales expectations rose to the highest level since April 2022.
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