There’s a lot of worry that presidential candidates Hillary Clinton and Donald Trump may be hurting economic activity with their words.
The basic idea is that if Americans are unsure about the future they may be inclined to slow down spending until they know things such as how much they will pay in taxes or what the costs of goods from overseas will be.
CEOs of major corporations are using the election as an excuse for their less-than-stellar earnings. Carnival Cruise Lines said that it expects the election to impact vacation bookings and Yum! Brands — the owners of KFC, Taco Bell, and Pizza Hut — pinned election uncertainty on their sluggish sales.
The only problem with this, almost every economic measure seems to be flying in the face of the assumption.
For on thing, despite all the concerns over Americans hoarding their cash until they know for sure who will win, it appears that spending hasn’t slowed significantly.
Friday’s retail sales report came in with a 0.6% month-over-month growth and the sub-indexes looked strong. Retail sales for discretionary items are growing at a strong clip, as noted by Renaissance Macro’s Neil Dutta.
“So, people are eating out (+0.8%), renovating their homes (+1.4%), and buying cars (+1.1%) — two months before the election,” said Dutta in an email following the release. “Yup, lots of election related uncertainty delaying discretionary spending.”
Personal consumption over the last two months has also been relatively strong, jumping 0.3% in July and staying flat in August. Even large ticket items are still seeing solid demand as auto sales remain near all-time highs.
Additionally, consumer confidence, as measured by the Conference Board, recently hit its highest level since the recession. The University of Michigan’s measure fell unexpectedly in its preliminary reading on Friday, but it still remains in the range-bound area it has occupied over the past two years.
Even the same corporations that have been complaining about election uncertainty are seeing improving profit growth after a long stretch of disappointments.
Now it may be that people are discounting the possibility of a Trump victory. Clinton has been consistently leading in the polls and most models and prediction markets assign an 80% or more chance of her winning. Consumers seem to think similarly, according to the UMich index.
“The surveys continued to track which candidate consumers expected to win the presidential election — not who they intended to vote for or favoured,” said the release from Richard Curtin, director of the survey. “In every survey conducted since June, the majority of consumers expected a Clinton victory by wide margins — by +46 percentage point in October, up from +34 in September and +43 in August.”
It may also be that consumers don’t really think either candidate makes much of a difference to their personal finances.
“When asked who would be better for their personal finances or for economic growth, Clinton also held an advantage over Trump, but it was still true that more consumers replied that neither Clinton nor Trump would make much of a difference to their finances or the economy,” wrote Curtin.
There may be some possibility that these measures could slow more as the election gets closer — anything can happen — but it doesn’t appear that American consumers are altering their spending because of the rhetoric between Clinton and Trump.
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