Economic Costs of War Impact Consumer Confidence
There’s a growing sense of unease among Americans regarding the US economy, according to recent reports.
The Conference Board noted that consumer confidence dipped in May. However, it wasn’t all doom and gloom. While current perceptions have worsened, some optimism emerged regarding the future. Though expectations for the labor market and overall economy six months down the line remain concerning, they did see a slight uptick last month. Interestingly, inflation expectations from last year have also shown improvement.
On a related note, a consumer sentiment survey from the University of Michigan indicated a stark decline. It revealed that consumer confidence hit record lows, with both outlook and current views faltering. Last year’s inflation expectations, regrettably, have also taken a downward turn.
But what explains this disparity? The University of Michigan’s metrics prioritize everyday financial concerns, like whether it’s a good time to purchase big-ticket items. This kind of focus makes their index especially reactive to shifts in inflation. Conversely, the Conference Board leans more towards labor market conditions and broader economic trends, making the differences in perspectives more pronounced.
Gallup, too, reflected this downtrend in its Economic Confidence Index, which worsened in May, reaching levels not seen since 2022 when inflation was rampant and household incomes were declining. Currently, Gallup’s index sits at -45, slightly better than June 2022’s low of -58, but indicative of troubling sentiments during Biden’s administration. The decline, Gallup reported, stems from negative ratings about both the current economic situation and future prospects.
The Economist/YouGov poll mirrored these findings. Fewer individuals described their economic situations as excellent or good, while a growing number consider their financial statuses as fair or poor. Only 15% think economic trends are improving, while a staggering 63% report worsening conditions.
Even Supporters Are Feeling the Strain
It would be easy to dismiss these findings as biased or purely partisan. Republican and Trump supporters often seem underrepresented in consumer confidence surveys. Plus, we remember how predictions of an imminent economic collapse soon after Trump’s election turned out to be unfounded, as many economic fundamentals remained the same.
Yet, the recent dip in sentiment appears to reflect genuine shifts in public opinion, possibly linked to soaring oil and gas prices as well as ongoing tensions related to the war in Iran.
This change is particularly evident among Trump supporters and conservatives. Previously, there was a strong overlap among these groups in their positive perceptions of the economy, with many asserting it was improving. That sentiment, however, has shifted.
For instance, an Economist/YouGov poll from mid-February found that 58% of Republicans believed the economy was on the upswing, whereas only 18% felt it was deteriorating—a net positive of 33%. Fast-forward to the latest poll conducted from May 15th to 18th, and that net positive plunged to a mere 2%.
Among conservatives, positivity dropped from 29% in February to 2% in May. For Trump supporters, it fell from 32% to just 6%.
MAGA supporters still seem somewhat resilient, but general optimism among them isn’t robust. Back in February, 62% thought the economy was improving against 13% who believed it was worsening, netting a significant 49%. Now, those reporting improvements have reduced to 49%, while the outlook of further decline has moved up to 16%, bringing the net positive score down to 33%.
A striking trend is that rather than worrying about the economy getting worse, many respondents describe it as “more or less flat,” with that view rising from 22% to 31% between February and May.
This sentiment is less applicable across the board. For Republicans, perceptions of economic decline jumped from 18% to 34%. Among conservatives, that number rose from 21% to 33%, and for Trump supporters, it increased from 19% to 30%.
Similar trends are echoed in a University of Michigan study. Their indicators for the Republican Party’s current state have consistently decreased, from 92.1 in February to 78.5 in May. The expectation index also dwindled, dropping from 102.9 in January to 88.6 in May. Although Republican economic confidence remains positive at 22, it’s at its lowest point during Trump’s second term, as reported by Gallup.
Shifting Political Landscapes
There’s a silver lining, albeit a dim one. Even though numbers on the Republican side have dipped, they still edge out those of the Democratic Party in a notably dire economic climate. Back in July 2022, when inflation was particularly concerning, the Democratic Party’s economic indicators had slumped significantly.
Despite the slight comfort in this comparison, it’s a stark reminder of how bad things have gotten under Biden’s administration. Gallup’s Economic Confidence Index, currently at -45, harks back to the last summer’s low of -58. Data from mid-May showed a mere 14% of Americans feeling optimistic, nearly identical to the present-day sentiment.
Yet, amidst the economic downturn, some experts had anticipated a “red wave” which did not materialize, instead witnessing a “purple ripple.” Though Republicans gained the House majority, the increase was marginal, with only nine seats flipped, leaving them with a slim 222-213 lead. In contrast, Democrats retained control of the Senate, even expanding their numbers.
