Breitbart Business Digest: Democrat Worries Likely Behind Unexpected Consumer Confidence Decline

Consumer Confidence Takes an Unexpected Dip

Consumer confidence unexpectedly worsened in February, with the outlook for the economy falling back into recession warning territory.

The culprit may be Democrat worries that November could usher in a second Trump presidency.

The Conference Board’s measure of consumer confidence rose in each month from November through January. Wall Street’s economists had expected it would rise again in February.

There was good reason to expect consumer confidence to continue its climb in February. The economic news has been mostly positive. Home prices are rising. The economy is adding jobs rapidly, unemployment is very low, and jobless claims have returned to very low levels. Inflation has started to climb on a month-to-month basis but has not (so far) climbed to the alarming levels seen in the two prior years.

Mixed Signals from Michigan

The University of Michigan’s measure of consumer sentiment showed a slight improvement, although the report was mixed. The view of current conditions slipped a bit while the outlook for the economy improved slightly.

Underneath this, however, was a big partisan shift in consumer sentiment. Republicans are feeling better about the economy than they had been, and Democrats are feeling worse, according to the University of Michigan’s survey.

The consumer sentiment index for Democrats slipped from 101.7 in January to 98.4 in the preliminary February tabulation. That’s still a very high score for the Biden era. In fact, apart from January, it is better than it has been since the honeymoon phase of Biden’s presidency in the first half of 2021.

On the other hand, it is low by historical standards. It is comparable to how Republicans rated the economy back in the second half of 2020 in the month’s prior to the election—which was much worse than how Republicans felt prior to the pandemic. And it is lower than the Democrat scores in the final two years of the Obama presidency.

A Changing Partisan Current

Perhaps surprisingly, the decline in Democrat sentiment was driven by views of current conditions. The reading of the present fell from 106.7 to 96, while the expectations reading ticked up from 98.5 to 99.9.

Republicans, on the other hand, were more positive about both current conditions and expectations. The Republican rating of current conditions is at its highest since August 2021, when the inflationary effects of the Biden administration’s reckless spending and the Federal Reserve’s unduly accommodative policy were first becoming clear. Republican expectations improved to the best level since November 2020.

According to Joanne Hsu, who runs the University of Michigan survey, both Republicans and Democrats are increasingly focused on the upcoming election and the impact that could have on the economy.

“A growing share of consumers spontaneously mention that future economic outcomes are contingent on the upcoming election, but there are few differences in expectations between those mentioning elections and those who do not,” Hsu said. “Over the course of the last year, a growing share of consumers have spontaneously mentioned the upcoming elections at some point during the interviews. Only about 1.3 percent mentioned elections in January 2023; one year later, 17 percent did so.”

At first glance, it might seem odd that November’s election would affect views of current conditions. Why would an event in the future change how people feel about the economy now? It’s easy to see how the expectations number could shift around electoral prospects, but the current conditions shift is a bit more mysterious.

This is a bit less mysterious, however, when we look at the historical pattern of partisanship in the view of current conditions. In the immediate aftermath of the 2016 presidential elections, prior to Donald Trump taking office, Republicans felt much better about current conditions. Nothing had really changed in the economic reality, but perceptions had changed.

Four years later, things went in the opposite direction. Republican views of current conditions deteriorated even before Biden took office, and the views of Democrats improved.

In other words, there’s a partisan component to current conditions.

The Conference Board does not publicly release partisan breakdowns of its consumer confidence number, but it notes that the looming election is playing a role.

“February’s write-in responses revealed that while overall inflation remained the main preoccupation of consumers, they are now a bit less concerned about food and gas prices, which have eased in recent months. But they are more concerned about the labor market situation and the US political environment,” Conference Board economist Dana Peterson said.

Given the improvement among Republicans in the University of Michigan measure, it is likely that this additional concern about the “political environment” is coming from Democrats worried about the election.