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US Consumer Sentiment Index Slumps as Outlook Darkens Among GOP Supporters

Jay Brahach November 13, 2020

The University of Michigan’s (UoM) preliminary consumer sentiment index for November missed expectations by 5.1 percentage points this morning, dropping to 77.0 from 81.8 in October.

The trade-weighted US dollar index (DXY) was largely unchanged on the back of this release.

Prior to the data release, markets were anticipating increased optimism from consumers in the aftermath of a Joe Biden victory in the US presidential election, but in actuality, it is likely that a Democratic win has contributed to this weaker data.

This is illustrated by breaking down survey participants by political persuasion. Democratic voters have pointed to an increase in COVID-19 cases since the beginning of the month as a cause for concern, and these fears have alleviated any optimism derived from economic policy the Democrats may implement in the months to come.

Almost 60% of Democrats reported that their normal life had changed to a great extent due to the coronavirus compared with just 34% among Republicans, the University of Michigan index indicated.

While a Democrat win has failed to strengthen expectations for its followers, Republicans see a loss of the White House as threat to economic expectations. The index for consumer expectations dropped 10% from October as a result, with Republican voters specifically having the worst outlook since Trump took office.

The next few months will not be easy for the President Elect, and this is reflected in the consumer-sentiment data. While Biden may have won the White House, the Senate appears to remain under Republican control – at least prior to two senatorial runoff elections in Georgia in January – suggesting any economic recovery plan will need to see some compromise on both sides.

The final UoM Consumer Sentiment figures at the end of the month will likely look a little different, given vaccine optimism which bolstered markets earlier in the week and might not be captured in the preliminary figures.

With Christmas fast approaching, it will be fascinating to see how Black Friday plays out at the end of the month from a consumer-spending perspective. It will likely give retailers a taste of what to expect come the festive period. If today’s data is anything to go by, this winter is looking to be a hesitant one for consumers.


Jay Brahach

Account Executive & Currency Analyst