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Key Takeaways
- For months, surveys have shown that people are uncertain about what the election outcome could mean, with many putting off financial decisions until the results are in.
- With the presidential election upon us, economists are looking for an improvement in consumer and business sentiment.
- While consumers have been pointing to fears around the election, concerns over politics aren’t as pronounced this election cycle as people still put worries about prices and inflation ahead of the election.
Consumers and businesses have been uncertain about the election for months, which has weighed on several economic indicators. Now that election day is here, economists expect consumer and business sentiment to take a turn for the better.
The widely followed Michigan Consumer Sentiment Index is just one of several economic surveys in which respondents say the upcoming election impacts their economic expectations. Across several surveys, many consumers and businesses say they are waiting for the election to conclude before making long-term plans for the upcoming year.
“The upcoming election looms large over consumer expectations,” said Joanne Hsu, director of the University of Michigan Surveys of Consumers in the latest results. “Regardless of the eventual winner, a sizable share of consumers will likely update their economic expectations based on the results of the election.”
And it’s not just consumers who are anxious about the election’s conclusion. Purchasing Managers’ Index (PMI) surveys also show business managers are waiting for election results before finalizing long-term plans.
“There is concern over the economy, and it feels like a lot of people are waiting to see which way the election goes in November before making a solid plan for 2025 and beyond,” said one anonymous comment from a business in the Institute of Supply Management’s September PMI report.
Companies Also Report A Pause in Financial Decisions
Economists aren’t the only ones noticing the pause in making large financial decisions. Some companies reported slower sales during earnings calls as buyers wait before making significant spending decisions.
One example is Whirlpool (WHR), the maker of appliances like washers, dryers and ovens. The company reported a sales slump in its most recent quarter, which executives partially attributed to election anxiety.
“The pre-election consumer sentiment is just not good,” said Whirlpool CEO Marc Bitzer in an October earnings call. “We’ve seen a similar pattern in the last election and election before. Anybody living in the U.S., you’re exposed to negative news every day and negative messages every day, and that does not lift consumer sentiment.”
Is This Normal?
According to economists at Wells Fargo, election cycles often dent consumer sentiment. However, economists expect consumer and business sentiment measures to bounce back once the election is determined.
“It’s not unusual to see confidence stall out ahead of a presidential election as the fate of the White House hangs in the balance and weighs on household optimism,” wrote Wells Fargo economists Tim Quinlan, Shannon Seery Grein and Jeremiah Kohl. “A quick look at past election cycles suggests there is a rise in confidence in the wake of an election amid the certainty of the result, regardless of which political affiliation wins office.”
Whirlpool’s Bitzer said that he expects consumers to get back to spending once the election has been decided.
“The good news is, in prior elections, we saw pretty quick recovery of consumer sentiment once the elections were over, irrespective of outcome,” he said.