Consumer sentiment unexpectedly dropped in early November as Americans witnessed the presidential election and surging coronavirus infections.
The University of Michigan’s mid-month read of consumer sentiment showed a sharp decline in consumer outlook and a small dip in current conditions, indicating that consumers are increasingly wary about the near-term future.
The Index of Consumer Sentiment fell from 81.8 to 77. Economists had forecast an improvement to 82.
The gauge of current economic conditions ticked down to 85.8 from 85.9. The measure of expectations dropped nearly 8 points from 79.2 to 71.3.
“The outcome of the presidential election as well as the resurgence in covid infections and deaths were responsible for the early November decline,” said Richard Curtin, the chief economist of the survey.
Curtin said that interviews conducted following the election recorded a substantial negative shift in expectations of Republicans, but recorded no gain among Democrats. Curtin said it is likely that fears about the pandemic had overwhelmed any positive feelings about Democrats following the election.
This contrasts starkly with the reaction of consumers following the 2016 election. Following Trump’s victory, the index jumped 4.4 points to 91.6 in the mid-November reading, more than a full point above the consensus forecast. The final November reading was even better, hitting 93.8.
“The initial reaction of consumers to Trump’s victory was to express greater optimism about their personal finances as well as improved prospects for the national economy,” Curtin said at the time.
That reaction was in part due to Trump’s populist message. By contrast, Joe Biden was strongly backed by Wall Street, Democrat special interest groups, and leftwing activists and ran on an agenda seen as friendlier to the economic, political, and cultural establishments in the U.S.
In 2016, there also appeared to be an improvement in expectations due to relief that the election was in the past. That is not evident in the November 2020 survey, perhaps because the results of the election are still being contested.
Democrats are fare more likely to say that the pandemic is having an impact on their lives. According to the survey, 59 percent of Democrats reported that their normal life had changed to a great extent due to the coronavirus compared with just 34 percent among Republicans.