Divergence in consumer confidence may be a symptom of income inequality

US consumer confidence indicators show visible improvements since the government shutdown dip back in October (see post) – although confidence measures have stalled this month.

On a longer time scale, confidence, while still significantly below historical averages, has improved tremendously since the Great Recession. There is however a troubling trend. The improvement in the top income bracket has been way ahead of the lower income survey participants. In fact the gap between households with incomes of $35-$50K per year and those with incomes that are above $50K is at record levels over the past few months.

Source: Wells Fargo

Given that confidence is often linked to income growth (including expectations of future income), this could be a further indication of wage stagnation for employees in the lower wage brackets (see discussion). In the long run this growing income inequality may end up creating headwinds for economic expansion in the US.