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WASHINGTON (Reuters) - U.S. consumer sentiment eased off a 13-year high in early February likely as some of the jubilation over Donald Trump's election victory ebbed, but it remained strong enough to suggest that consumers will continue to drive the economy.
Confidence surged in the wake of Trump's victory last November. The jump in sentiment tracked a stock market rally as both consumers and investors focussed on the business mogul-turned politician's promises to cut taxes and reduce regulations.
These proposals, whose details remain vague, were viewed as pro-business and favourable for economic growth. At a meeting with airline executives on Thursday President Trump said he would announce a "phenomenal" tax plan in the next few weeks, but offered no specifics.
The University of Michigan on Friday said its consumer sentiment index fell to 95.7 early this month from a reading of 98.5 in January, which was the highest since January 2004. The survey's current conditions sub-index of consumer expectations dropped to 85.7 from January's reading of 90.3.
"This might be due to a lack of follow-through from Washington on the details of the plans for tax cuts, reforming healthcare, and infrastructure spending," said John Ryding, chief economist at RDQ Economics in New York.
The University of Michigan said consumers who participated in this month's survey were split in their views on the Trump administration's economic policies. Thirty percent of respondents had a favourable view, while 29 percent had a negative perception.
As such, nearly six-in-10 consumers made a positive or negative mention of government policies, which the university said was an unusually high reading for the survey.
Consumers' views were split along party lines, with self-identified Democrats anticipating an economic recession, while self-identified Republicans expected continued growth.
"America is clearly in a politically charged environment, and that was evident in the survey results," said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.
"The bottom line is that consumers remain understandably upbeat, supported by continued strength in the labour markets ... and appear to be of the positive mindset for spending growth to continue in the coming months."
Consumer spending accounts for more than two-thirds of U.S. economic activity. The dollar was trading higher against a basket of currencies, while prices for U.S. government debt fell. Stocks on Wall Street hit record highs on the back of Trump's promised tax announcement.
The University of Michigan survey also showed consumers' inflation expectations remaining generally low early this month. The low inflation theme was also evident in a separate report from the Labor Department on Friday.
Import prices increased 0.4 percent last month amid further gains in the cost of energy products after advancing 0.5 percent in December. In the 12 months through January, import prices jumped 3.7 percent, the largest gain since February 2012, after advancing 2.0 percent in December.
But import prices excluding fuels fell 0.2 percent following a 0.1 percent dip the prior month. They were unchanged in the 12 months through January.
Import prices are rising as firming global demand lifts prices for oil and other commodities, but the spillover to a broader increase in inflation is being limited by dollar strength.
The dollar gained 4.4 percent against the currencies of the United States' main trading partners in 2016, with most of the appreciation occurring in the last months of the year.
This suggests that the greenback will continue to depress imported inflation in the near-term even though the dollar has weakened 2.9 percent on a trade-weighted basis this year.
"We expect to see the dollar generally strengthen in the coming months, which will keep non-fuel import price inflation tame," said Sarah House, an economist at Wells Fargo Securities in Charlotte, North Carolina.
Prices for imported fuels increased 5.8 percent last month
after rising 6.6 percent in December. The cost of imported food dropped 1.3 percent after declining 1.5 percent in December.
Prices for imported capital goods edged down 0.1 percent, while those for automobiles dropped 0.5 percent -- the biggest decline since January 2015.
Reporting By Lucia Mutikani; Editing by Andrea Ricci