President Biden has been plagued by low popularity ratings and extremely low consumer confidence numbers for several months now, which is concerning for the White House as the nation approaches a year with a presidential election. However, new evidence indicates that things are starting to change.
By several indicators, Americans’ confidence in the economy is higher now than it has been in years. Preliminary data suggests that they expect inflation to continue declining and that rates of interest will shortly reduce.
If the renewed optimism lasts, it would help Mr. Biden’s chances of winning reelection and complicate matters for Republican front-runner Donald J. Trump, who has been disparaging the Democratic incumbent’s economic record.
It’s too soon for Democrats to celebrate the most recent economic data and confidence ratings, according to economists, political scientists, and consumer sentiment specialists. Numerous financial hazards yet exist that could impede the seeming advancement. In fact, there’s presently no clear winner come November according to algorithms that attempt to forecast election results based on economic statistics.
Recovering confidence could help Mr. Biden, said Neil Dutta, an economist at Renaissance Macro, especially if consumer sentiment continues to pick up this year as he expects.
If sentiment simply hovered at today’s levels, he said the simple historical relationship between consumer confidence readings and incumbent vote share would give Mr. Biden about 49 percent of the vote. But the job market is strong, gas prices are moderate and the stock market just hit a new record, all of which could drive further improvement
Why does this model forecast such closeness in the race during a period of stable economic growth? Inflation is the main factor. According to Mr. Fair, voters typically have a lengthy memory of price hikes. They consider more than just the most recent inflation figure; they also consider the amount that prices have climbed during a president’s term.
This means that voters are likely to recall 2022 and late 2021, when prices were rising quickly, even though prices have increased over the past six months at what is historically a fairly average pace.
“People look farther back than that; what voters are noticing is that prices have increased since Biden assumed office,” Mr. Fair stated.
Nevertheless, Mr. Trump’s performance in 2016 and 2020 was below expectations based only on the status of the economy, which presented two significant challenges to Mr. Fair’s model. Thus, even with higher costs, it’s feasible that a replay of this drag may help Mr. Biden gain a larger vote share if there is what Mr. Fair referred to as a “negative Trump residual.” (But Mr. Fair cautions on his website that there aren’t enough data points to test that theory.
Regarding how this election’s results will be influenced by consumer confidence and the state of the economy overall, there are also a lot of unknowns. The state of the economy will undoubtedly have an impact, according to University of Iowa political scientist Michael Lewis-Beck.
He remarked, “The economy plays a role that is as fundamental as it gets—it’s like rivers flowing to the sea.”
However, Mr. Lewis-Beck noted that other elements could cloud how closely economic data and election results track one another. These elements include the sense of isolation that has plagued many people since the coronavirus and the fact that Mr. Trump is a former president and may be viewed by voters as a “quasi-incumbent.”
Even still, Americans’ sentiments will probably change as election day approaches later in the year based on the state of the economy throughout the following six months.
This might be detrimental to the White House if the economy slows. For example, the economy may start to suffer after several months of rising Federal Reserve interest rates, or gas costs may rise due to Middle East geopolitics
However, most analysts predict that in 2024 the Fed will start lowering interest rates and that the economy will progressively contract. According to forecasters in a Bloomberg survey, by year’s end, unemployment will increase by roughly 0.5 percentage points, inflation will keep down, and economic growth will decelerate but stay positive.
This rather optimistic perspective could be the reason behind Mr. Biden’s administration’s recent emphasis on the increasing consumer mood statistics, which has historically lagged behind improvements in the actual economy. In a speech on Friday, Mr. Biden mentioned the most recent increase and stated, “We’ve got more to do,” while also highlighting recent advancements in the economy.
All of these things are being observed by people, Mr. Lewis-Beck stated. Mr. Biden “should stay on message, and I think it will eventually get through,” if he hopes to persuade people.
