Americans still think the economy is pretty bad, but revived hopes for a Democratic election boosted consumer expectations in August.
The University of Michigan Consumer Sentiment Index was roughly flat for the fourth straight month. Compared to a year ago, consumer sentiment is slightly weaker than it was a year ago.
But beneath that surface calm lies a host of fundamental changes.
The index measuring consumers’ current economic conditions fell 2.9 percent in August. Both Democrats and Republicans gave the economy a worse rating than they did in July. Independents, curiously, are slightly more optimistic than they were last month.
The Expectations Index rose 4.8%, mostly because Democrats became more optimistic about the future of the economy, while expectations among Republicans and independents remained roughly constant.
“With election developments dominating headlines this month and Harris replacing Biden as the Democratic presidential nominee, support among Democrats has increased by 6 percentage points. Support among Republicans has moved in the opposite direction, falling by 5 percentage points this month. Support among centrist independents has increased by 3 percentage points,” said survey director Joan Hsu.
The election has become a crucial focus for consumer expectations.
“Survey responses usually include who consumers currently expect to be the next president. Some consumers point out that if their election predictions do not come true, the economic trajectory will be completely different. Therefore, while consumers still expect inflation, their top concern, to remain stable, their expectations may change as the presidential election campaign comes into focus,” Su said.
Kamala Harris also outperformed Donald Trump on which candidate is better for the economy: 41% of consumers said Harris would be better, compared with 38% who said Trump would be better. From May to July, Trump had a 5-point advantage over Biden on the economy.
That’s similar to a recent poll by the Financial Times and the University of Michigan Ross School of Business (unrelated to the consumer sentiment survey), which showed Harris with 42% approval to Trump’s 41%, though other polls have shown Trump holding an economic lead in several states, including so-called battleground states.
