How do election fears affect consumer spending?

Retailers started the fall shopping season pretty well. After a slump in August, retail sales rose 0.4% in September, more than economists expected. Excluding car and truck sales, which were flat, and gasoline sales, which fell due to a drop in prices, retail sales rose an even stronger 0.7%.

So what’s there? Consumer sentiment surveys suggest that people are feeling pretty bad about the economy and their personal finances right now. And the uncertainty surrounding the election isn’t helping.

The September retail data is one of the last government reports on consumer activity we will receive before the November election.

“Consumers are still spending money, and that’s a good sign for the economy overall,” said Mickey Chadha, an analyst at Moody’s Ratings.

Now there is a major contradiction in this ongoing retail spending rally.

“Over the last two years, we’ve seen fairly strong consumer spending, even though consumer sentiment has been subpar,” said Joanne Hsu, director of consumer surveys at the University of Michigan.

She said the reason spending is doing well is because incomes are very high. But now another factor comes into play: “People are incorporating their election expectations into their economic views,” Hsu said.

Uncertainty about the future economic situation is increasing.

Meanwhile, polling firm Ipsos found that half of consumers plan to spend less and save more in the run-up to Election Day, said Chris Jackson, senior vice president of Ipsos.

“Consumers are kind of holding their breath, pulling back a little bit and not necessarily willing to take risks or spend big,” he said.

The economic news has been pretty good lately – inflation is down, the job market is strong, the stock market is up.

But, Jackson said, consumers do or don’t absorb these messages — based largely on their party affiliation.

“We asked people, ‘Is it true or false that the stock market is at or near all-time highs?'” Jackson said of a poll just released by Ipsos. Only about 40% said it was true.

“And that is almost directly related to how people view the election. People who know the stock market is at or near all-time highs are overwhelmingly supportive [Vice President Kamala] Harris. And people who don’t believe that are overwhelmingly supportive [former President Donald] Trump,” Jackson said.

This summer, the University of Michigan poll found that sentiment among Democrats improved as Kamala Harris rose in the polls, while Republicans grew increasingly upset about the economy.

As poll numbers narrowed, that gap narrowed.