US consumer confidence in presidential election years

The impact of a presidential race on consumer confidence is murky. Consumers’ perceptions of the world are more heavily influenced by the things that have an immediate impact on household budgets and planning. Who is to become president of the United States can feel a little more distant than if the price of gasoline is rising or home values are plunging, or if the economy and jobs are in expansion or contraction.

In looking at the behavior of the University of Michigan consumer sentiment index, if there is any constant, it is that the months before an election tend to raise a sense of uncertainty that eases once the election is held. There are notable exceptions like the contested outcome of the 2000 Bush-Gore race or the divisive reaction to the Trump-Biden contest in 2020. When it looked like there would be a rematch between Donald Trump and Joseph Biden in 2024, consumers were increasingly gloomy, although there were economic developments at the time that should also be taken into account like the less hopeful outlook for disinflation and lengthened prospects of a rate cut. As the summer ends, consumers are still feeling relatively pessimistic amid a still highly contentious election environment despite the change in the contest with Kamala Harris.

Consumer sentiment is likely to remain wary in September and October despite some positive changes like falling mortgage rates, stable layoff activity, and a strong equity market. Nonetheless, low confidence readings may not be backed up by what consumers actually do in terms of spending on goods and services.