Is the Consumer Always Right?
The University of Michigan’s survey of consumer sentiment has taken a big hit over the past two months, mostly in reaction to the resurgence of inflation.
At the start of the year, the index of consumer sentiment jumped to a reading of 79, the highest it had been since it first started getting dragged down by rising prices in July 2021. We had just come off of several months of relatively benign inflation figures that were giving rise to hopes of interest rate cuts, soft-landings, and price stability.
Then inflation came roaring back in January, February, and March. It took a little while for this to drag down consumer sentiment, but there was a big decline in the May reading, with the gauge falling from 77.2 to 69.1. Economists were expecting a rebound in June, but that did not happen. Instead, the preliminary reading shows a further decline to 65.6, the lowest reading since November.
This is creating headaches for the Biden administration because it was really counting on improvements in the inflation situation to boost how Americans feel about the economy. What it really wanted was a rate cut from the Federal Reserve that it could tout as proof that the inflation problem had been overcome.
Instead, it is getting a Fed that appears to be determined to stay on hold—likely until after the election—and a public whose view of the economy is getting grimmer.
Not all elections are decided by how consumers feel about the economy. Wars, scandals, social issues, and a host of other factors can take precedence. But in some elections, the economy looms especially large, either because people are very happy with how things have been going or very unhappy. This is even more true when people are not just unhappy with economic conditions but are also unhappy with the incumbent’s economic policies.
We pointed out yesterday that the latest survey from the Economist and YouGov found that 55 percent of voters say the economy is getting worse, and just 21 percent say the economy is getting better. When asked whether they approve of Biden’s handling of the economy, 39 percent strongly disapprove and 15 percent somewhat disapprove. Just 19 percent strongly approve, and 18 percent somewhat approve.
That poll is not an outlier. The New York Times-Sienna poll of registered voters came out slightly worse for Biden. Eighteen percent strongly approve and 17 percent somewhat approve. Fourteen percent somewhat disapprove and 49 percent strongly disapprove of Biden’s handling of the economy.
Compare that to how registered voters remember Trump’s handling of the economy. The Times-Sienna poll found that 44 percent say they strongly approve of the way Trump handled the economy, and another 20 percent somewhat approve. Just 13 percent somewhat disapprove and 20 percent strongly disapprove.
Biden’s Hispanic Approval Gap
Although the establishment media has long attempted to depict support for Trump’s policies as rooted in racism and xenophobia, the polling numbers tell a very different story. The total approval level of Trump’s handling of the economy—combining somewhat and strongly approve responses—for white voters is 67 percent, just a few notches above the 64 percent for all voters. The approval level for Hispanic voters, however, is 74 percent, including 42 percent who strongly approve.
Biden’s approval rating on the economy among Hispanic voters is almost the mirror opposite. Seventy percent disapprove of Biden’s handling of the economy, including 45 percent who strongly disapprove. His net approval rating is just 25 percent.
What makes this even more troubling for Biden’s re-election campaign is that Hispanic voters care a lot about the economy. Nearly all voters tell pollsters that the economy is an important issue. In the Economist/YouGov poll, 96 percent of all registered voters say it is an important issue, with 71 percent saying it is very important and 25 percent saying it is somewhat important. Among Hispanic voters, however, 100 percent say the economy is important, with 74 percent saying it is very important.