K-Hive Mind Buzz: Revived Democrat Hope Boosts Consumer Sentiment

Americans still think the economy is pretty lousy but revived Democrat electoral hopes gave a boost to consumer expectations in August.

The University of Michigan’s index of consumer sentiment was essentially unchanged for the fourth consecutive month. Compared with a year ago, consumer sentiment is slightly worse than it was a year ago.

That surface calm, however, conceals a lot of underlying change.

The index tracking consumer views of current economic conditions fell by 2.9 percent in August. Both Democrats and Republicans gave the economy worse marks than they did in July. Independents, curiously have a slightly more positive view than they did last month.

The index of expectations jumped 4.8 percent, largely because Democrats have become much more hopeful about the future of the economy. Expectations of Republicans and independents were nearly unchanged.

“With election developments dominating headlines this month, sentiment for Democrats climbed 6% in the wake of Harris replacing Biden as the Democratic nominee for president. For Republicans, sentiment moved in the opposite direction, falling 5% this month. Sentiment of Independents, who remain in the middle, rose 3%,” said Joanne Hsu, the direct of the survey.

The election has very much become a focus for consumer expectations.

“Survey responses generally incorporate who, at the moment, consumers expect the next president will be. Some consumers note that if their election expectations do not come to pass, their expected trajectory of the economy would be entirely different. Hence, consumer expectations are subject to change as the presidential campaign comes into greater focus, even as consumers expect that inflation-still their top concern-will continue stabilizing,” Hsu said.

Kamala Harris has also edged above Donald Trump in the survey’s question about who is the better candidate for the economy. Forty-one percent of consumers now say Harris would be better, versus 38 percent who say Trump will be better. Between May and July, Trump had a five point advantage over Biden on the economy.

This is similar to a finding by a recent poll by the Financial Times and the University of Michigan Ross School of Business (unrelated to the consumer sentiment survey) that gave Harris the lead at 42 percent over Trump’s 41 percent.  Other polls, however, show that Trump retains his advantage on the economy, including several in so-called battleground states.