In the lead-up to the upcoming elections, the Kamala Harris campaign experienced a whirlwind of emotions spurred by the release of the University of Michigan’s consumer sentiment barometer, which provided the latest insights into public sentiment towards the economy. Historically, the Harris and Biden campaigns have believed that persistently low consumer sentiment metrics did not accurately represent the economic fundamentals of the country. The expectation was that as the economy continued to improve, reflected by stronger indicators, consumer sentiment would eventually rise in tandem. However, this has been an elusive goal as consumer sentiment has fluctuated throughout the election year, predominantly dominated by concerns over inflation rather than a greater perception of economic stability.
At the beginning of the year, consumer sentiment ratings peaked at 79, marking the highest reading since mid-2021. This initial spike followed the reopening of the economy, but consumer optimism quickly faded due to an unexpected surge in inflation that caused widespread concern about the economy’s sustainability. The brief rebound in sentiment early in the year was derailed as inflation rose again, leading to pervasive doubts about the government’s ability to maintain price stability. The contrast becomes stark when compared to pre-pandemic levels during Donald Trump’s administration, where consumer sentiment reached a considerably higher index of 101. This persistent low sentiment amid reassuring economic indicators exemplified a disconnect that the Biden administration has struggled to remedy.
Research indicates that consumer sentiment significantly influences voting behaviors; variations in how consumers perceive the economy can sway the prospects of the incumbent party. Despite the research’s acknowledgment of limitations due to infrequent election cycles, a trend emerges showing that higher consumer sentiment correlates with better electoral outcomes for the incumbent party. Hence, when the University of Michigan reported a rise in consumer sentiment, many in the Harris campaign likely harbored hope. Unfortunately, delving deeper into the numbers revealed that this uptick was primarily driven by Republican sentiments—specifically, a newfound optimism stemming from expectations surrounding a Trump victory—while Democratic sentiment actually declined.
Analysts have often grappled with the reasons for consumer sentiment’s prolonged low state, considering various narratives, including partisan biases. Many Democrats assert that Republicans’ despondency is largely linked to the party’s opposition to a Democratic administration, reflecting partisan discontent rather than genuine economic concerns. Historical patterns show that partisanship indeed plays a significant role, with consumers aligning their economic perceptions closely with their political affiliations. Even though Republicans experienced heightened sentiments during Trump’s presidency, the sentiment bounced back and forth as party leadership changed. However, this partisanship fails to account solely for the current economic perceptions among all groups.
Interestingly, the consumer sentiment index illustrates that partisanship does not undermine the merits of the survey but rather highlights consumer attitudes during specific administrations. The all-important independent voters are also reflecting a wary sentiment toward the economy, with their own index peaking at nearly 66, after plunging to record lows in 2022. This cross-party discontent reveals that the prevailing economic conditions, specifically inflation, impact consumer perception far beyond partisan loyalties. Thus, it is clear that the lower sentiment readings are not just the result of Republican negativity but stem from a broader, collective unease about the state of the economy felt across the political spectrum.
The crux of consumer sentiment dissatisfaction can be tied back to persistent inflation rates and the resulting high price levels. This economic fundamental—sustained inflation—has overshadowed other potential indicators of recovery, leading consumers to approach the economy with skepticism. Unlike transient economic challenges, such as unemployment dips which rapidly recover, inflation creates a prolonged pressure on consumer confidence even when inflation rates show signs of moderation. The price levels, in fact, remain detrimental long after inflation rates decline, solidifying consumer skepticism about economic relief. Thus, the past few years reveal a critical truth: the gap perceived between consumer sentiment and economic fundamentals might not be a misconception; rather, inflation’s lingering impact deeply influences public perception and will remain a crucial factor in the upcoming election stakes.