Every four years, U.S. presidential elections become a focal point for voters, and this year is no exception. Questions about economic outlook, consumer sentiment, and policy are central to the 2024 election, impacting consumers, retailers, and manufacturers alike. NIQ's Vice President of Thought Leadership, Courtenay Verret, recently spoke with Yale economist Ernie Tedeschi about the implications of the election on consumer behaviour.
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Gauging consumer spending
Verret asked if election years influence U.S. consumer spending. Tedeschi noted that, generally, consumer spending grows in the year leading up to an election and continues to grow afterward. Historical data shows that real retail sales per household typically increase, and 2024 aligns with these trends, albeit slightly below median levels.
Consumer sentiment
Despite positive spending patterns, consumer sentiment remains low, with 43% of U.S. consumers feeling financially worse off than the previous year, primarily due to rising living costs and job insecurity. This aligns with findings from the University of Michigan's consumer survey, where 45% reported similar concerns.
The labour market
The job market presents a mixed picture. While unemployment is low and job creation remains strong, perceptions about job availability have worsened, leading to guarded consumer attitudes.
The say/do gap
Interestingly, despite low sentiment, real retail sales increased by 3.5% in recent months, indicating that consumers are spending positively, even if their feelings suggest otherwise.
Potential policy impacts
Several proposed policies could significantly affect consumer spending, including tariffs on imports, changes to tax structures for tipped income, and an expanded Child Tax Credit. Each policy carries implications for consumer budgets and spending behaviour, especially among low-income households.
As the 2024 election approaches, the intertwining of economic issues and consumer sentiment will be pivotal for retailers and manufacturers strategizing for the upcoming year.
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