Quick Bites | Public sentiment and US elections

The US economy is performing well. Real GDP grew over 3% last year, real disposable income rose over 4%, the unemployment rate is just 3.7%, and inflation is slowing sharply. Yet consumer confidence and Americans’ assessment of the government’s economic policies remain clearly below pre-pandemic levels. Why is this? How will confidence impact the US presidential election? Are we going to get Trump 2.0?

These are the latest betting odds from Ladbrokes. Are they a good indicator for an election that’s still more than 8 months away? Probably not.

Source: Ladbrokes 


If America were to hold its presidential election tomorrow, Donald Trump would be dancing at the inauguration ball come January next year. The Economist magazine’s polling average puts him up by 2.3% over Joe Biden nationwide. And across the six swing states expected to decide the election – Arizona, Georgia, Michigan, Nevada, Pennsylvania and Wisconsin – he leads by an average of 3.8%.

Source: The Economist 


So why are Americans deserting Joe Biden, when all the signs point to a robust and resilient economy?

Apart from non-economic factors (such as Biden’s age, disappointment with Kamala Harris, dissatisfaction with border control, American involvement in foreign wars, the culture wars between ‘woke’ and ‘anti-woke’ etc), the answer is partly a matter of perspective. For lower-income households, for example, the growth rate of real income has been disappointing recently.

Second, frustration with past high inflation appears to depress confidence for a long time. The hit to consumer confidence from the recent inflation surge peaked a year ago, in early 2023, and has faded only modestly so far. The impact of inflation on confidence might be particularly strong this time because prices of the most frequently purchased items including groceries, petrol, rent, used cars, and many services, rose especially quickly.

The implications for the November election are mixed. If economic forecasts are right, the drag on confidence from past inflation should fade meaningfully further but not fully by election day, and many other economic variables that matter most for confidence and voting would remain at solid levels in November. However, polls indicate that voters still see inflation as the most important economic issue and trust Republicans more to handle inflation and the economy.

The level of inflation, the share market, house prices and interest rates will all play a role in affecting consumer confidence between now and November. But politics as it is played in the US is a brutal sport, and there are sure to be many surprises along the way.



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