How’s the economy? It depends on how you vote
Republicans feeling confident, poll finds
Republicans aren’t just more confident about the economy than Democrats under President Donald Trump. That confidence seems to be translating into more purchases at the cash register.
And when Trump makes corporations and markets nervous, as he has done recently by ratcheting up trade tensions with other countries, Democrats are more likely to worry about the effects of his bareknuckled approach and rein in spending.
“Particular ideology is (playing) an increasingly prominent role in how people are evaluating the economy,” said Chris Jackson, vice president of Ipsos, the market research and polling company. “And there’s a certain extent to which consumer spending can be shaped by political sentiment.”
In June, 66 percent of Republicans felt more comfortable about making a major purchase, such as a home or car, than they did six months earlier, according to a monthly Ipsos survey. Just 44 percent of Democrats felt more comfortable. There has been a similar disparity, reflecting more bullishness by GOP members, since at least last summer, Ipsos figures show. Broadly, across the economy, Ipsos has found such sentiment typically affects actual sales, at least to some degree.
Equally telling: The share of Democrats feeling less comfortable about making a major purchase jumped from 46 to 56 percent in June. The portion of Republicans feeling less comfortable also increased but less sharply, from 27 to 34 percent.
Cooling confidence for some
Jackson said the cooling of confidence in June likely is related to intensifying U.S. trade standoffs that have roiled stocks. Last month, Trump slapped tariffs on steel and aluminum imports from Canada, Mexico and the European Union. He also has threatened tariffs on auto imports.
Anthony Williams, 49, of Phoenix, is a moderate Democrat who opposes Trump’s policies, including the tax cut he worries will swell the federal deficit. But he said he didn’t change his spending habits until the trade skirmishes escalated recently.
“If trade disputes become trade wars, and the economy becomes really bad, that can affect a lot of companies,” said Williams, an IBM employee who works on cybersecurity technology. “When (other companies’) business slows down, our business slows down.”
As a result, Williams, who typically saves about 35 percent of his six-figure salary, recently decided to sock away even more to gird for a possible downturn. He’s eating dinner out twice a week, down from at least four times. And he has decided to put off a trip to Portugal he planned for September.
“I have this fear that if the economy went bad, it might be difficult to find another job,” he said.
New car and a kitchen remodel
Gene Young, 63, of Sioux Falls, South Dakota, a staunch Republican, has the opposite view. “We do feel better and more confident today than before the election,” he said.
The tax cut is leaving him with more money in his paycheck. Plus, “it seems to us the administration is trying to run the country like a business,” said Young, editor of a publication for a local Catholic diocese.
While Young and his wife, Sarah, are generally prudent about purchases, they’re optimistic enough about the economy to spend all of Gene’s recent 2 percent raise rather save half as they’ve traditionally done. They plan to buy a new car to replace their 2000 Dodge Stratus and remodel their kitchen and bathroom.
Young said he worries Trump’s trade policies could hurt South Dakota soybean farmers, but “I’m not sure how that’s going to play out. … It’s not changing” his spending practices.
Meanwhile, other Trump policies, such as rolling back climate change rules, help energy and manufacturing companies whose employees tend to vote Republican, said Mark Zandi, chief economist of Moody’s Analytics.
Spending picks up
Overall, consumer spending picked up in the second quarter after a weak start to 2018, and it’s likely to be solid the rest of the year amid healthy job and income growth, as well as the tax cut.
Differences in spending between Republicans and Democrats don’t primarily appear to be income-related.
Last year, 32 percent of survey respondents among households earning $150,000 and above were Democrats compared with 27 percent who were Republicans, according to Pew Research Center. And
31 percent of respondents in households earning $100,000 to $149,000 were Democrats vs.
28 percent who were Republicans.
Republicans, however, have the edge in families earning
$75,000 to $99,000 — by 32 to
28 percent.
Early last year, the University of Michigan began tracking a shift in its consumer sentiment survey, with Republicans voicing more confidence in the economy and their financial conditions than Democrats, reversing the trend under President Barack Obama.
The Ipsos survey, however, more specifically captures divergent approaches to spending.
“It does make some sense that Republicans, given that their confidence is high, are willing to spend a little more,” said Chris Christopher, an IHS Markit economist who specializes in consumer spending. IHS, he said, has found the correlation between confidence and purchases is especially strong for big-ticket items such as cars and TVs, as well as clothing.