Consumer sentiment generally refers to consumers' attitudes and expectations about economic conditions. A new analysis published in Economic Inquiry indicates that U.S. party affiliation has a significant effect on consumer sentiment, and that sentiment, in turn, affects spending intentions.
In the study that relied on information dating back to 1991 and focused on data surrounding elections in which the governing party changed, survey respondents from Florida whose party affiliation matched the winning U.S. presidential candidate reported more optimistic views about personal and national economic conditions immediately after the election. In contrast, respondents from Florida whose party affiliation aligned with the losing candidate reported more pessimistic views about the same economic conditions. The study shows that these changes in consumer sentiment affected spending intentions among Floridians.
Spending intentions were also indicative of actual spending. For example, actual spending on durable goods increased more among counties with a larger share of Republican voters following the 2016 presidential election.
"Consumer sentiment measures are considered leading indicators by policymakers and economists, reflecting changes in household spending. We confirm this crucial role and emphasize the importance of partisanship in shaping consumer expectations," said corresponding author Hector Sandoval, PhD, Director of the Economic Analysis Program at the University of Florida's Bureau of Economic and Business Research.
URL upon publication: https://onlinelibrary.wiley.com/doi/10.1111/ecin.13215
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