How’s the econ­omy? It de­pends on how you vote

Par­ti­san di­vide af­fect­ing con­sumer con­fi­dence

USA TODAY Weekend Extra - - MONEY - Paul David­son

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 bare-knuck­led 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 ex­pected 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.

PHO­TOS BY GETTY IM­AGES

An Ip­sos sur­vey says Repub­li­can con­sumers are far more con­fi­dent mak­ing pur­chases right now.

A South Dakota cou­ple op­ti­mistic about the econ­omy plan a kitchen re­model.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.