Sentiment on the economy sinks — especially among Dems
Sentiment on the economy sinks — especially among Dems
Consumers in this economy are not thrilled. At all.
Their sentiment fell almost 10% between January and this month, according to survey numbers released Friday by the University of Michigan.
But behind that decline, there’s a stark divide between consumers. Because when you break sentiment down by political affiliation, you see two entirely different stories.
There is one thing that consumers across the political spectrum agree on: inflation isn’t going anywhere.
“Regardless of where you lean, I think there’s concern over what does it mean and how’s it going to impact me?” said Sonia Lapinsky with the financial advisory firm AlixPartners.
She said inflation fears and talk of tariffs make consumers feel uncertain. And uncertainty shows up as negative sentiment.
“They don’t want to spend money, they don’t want to take any risks. So that’s what we’re seeing, I think, a lot in the consumer, for sure,” said Lapinsky.
Republican sentiment is about the same as the previous month. Meanwhile, Democrats are freaking out.
That switch happened — you guessed it — in the fall.
“And then everything went pretty haywire after that, of course, as the political bias I think gets baked into that data set,” said Adam Turnquist, chief technical strategist at LPL Financial. He’s hopeful the political chasm will start to shrink soon.
“There’s probably some shock factor on maybe both sides coming out of the election. … So I would expect some of these sentiment indicators to normalize a bit,” said Turnquist.
But the divide didn’t start in November.
Michael Green, chief strategist at Simplify Asset Management, said consumer sentiment polarized in 2023, when the University of Michigan stopped gathering data by phone and started using an internet survey.
“You can imagine a phone interviewer saying something along the lines of, ‘OK, so you’re predicting a dramatic jump in inflation,’ and somebody on the phone responding and saying, ‘No, I mean, I just think inflation is really high,’” said Green.
Meaning that when you’re talking to another person, you’re more likely to moderate your view. Now that it’s people alone with their computers, “you have absolutely no obligation to fill in the survey with any form of accuracy. You can basically reflect any wild view,” he said.
While consumer sentiment remains divided, business leaders are feeling more confident. New data from The Conference Board said CEOs are the most optimistic they’ve been in three years.
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