Republicans are feeling great about the economy again. Democrats are really worried
By Matt Egan, CNN
New York (CNN) — A black cloud hovering ominously over the US economy has finally parted — at least in the eyes of nearly half of the nation. For the other half, the black cloud is just arriving.
That’s the starkly partisan picture painted by the first consumer confidence reading since President-elect Donald Trump’s victory last month.
Republicans, after years of doom and gloom, are feeling great about the economy again. Consumer sentiment among Republicans spiked in December to the highest level since November 2020, according to the University of Michigan.
The polar opposite story is playing out among Democrats. After years of mostly good vibes about the economy, consumer sentiment among Democrats tumbled in December to the lowest level since the summer of 2022, when gas prices were near $5 a gallon.
“It’s really striking to see how people perceive the world so differently,” said Oliver Allen, senior US economist at Pantheon Macroeconomics.
The post-election shift in the economic perceptions of Republicans and Democrats is not shocking. A similar story has played out following previous changes in power in the White House, including after the 2016 and 2020 elections.
Still, the magnitude of the shift is startling, and researchers say it reflects the county’s political polarization.
Consider that as recently as September, consumer sentiment among Republicans stood at a weak level of just 50, according to the University of Michigan. It has since surged to nearly 82.
Sentiment among Democrats stood at 91 as recently as October. But it has since plunged to 71.
“It’s like, ‘Wow, really? Do we live in the same place?’” said Hector Sandoval, director of the Economic Analysis Program at the University of Florida, who has studied the relationship between partisan politics and consumer sentiment.
Expectations spike for Republicans
Perceptions about current economic conditions haven’t changed dramatically. And that makes sense because the situation on the ground hasn’t changed much, except perhaps in the booming stock market or the value of bitcoin.
Instead, the election has jolted views about what comes next.
Consumer expectations among Democrats have plummeted by nearly 50% since October to the lowest levels since the Covid-19 pandemic, according to the University of Michigan. Expectations among Republicans have nearly doubled over that span to four-and-a-half-year highs.
Joanne Hsu, director of the surveys of consumers at the University of Michigan’s Institute for Social Research, said voters are recalibrating their feelings based on their views of Trump’s economic agenda.
“This is not just a matter of voters waving the flag of their favorite team,” Hsu told CNN. “It’s not that they belong to different realities. They are looking at the same reality. They just don’t agree on the implications of policies.”
Sticker shock worries
Hsu told CNN that 20% of consumers in the December survey spontaneously mentioned tariffs, and people who mentioned tariffs have much worse expectations for business conditions. Two months ago, just 2% of people spontaneously mentioned tariffs, a key plan of Trump’s economic platform.
“Democrats believe tariffs will lead to a resurgence of inflation. Republicans believe there will be a massive inflation slowdown,” said Hsu, a former economist at the Federal Reserve.
Many mainstream economists have warned that Trump’s plans to impose sweeping tariffs on friends and allies will increase consumer prices — perhaps significantly.
Trump has already threatened to impose 25% tariffs on Mexico and Canada on his first day in office, as well as lift existing tariffs on China. Trump has also threatened to spike tariffs to 100% on Russia, Brazil, China and other BRICS nations if they try to challenge the dominance of the US dollar.
With Trump’s tariffs looming, the University of Michigan survey revealed a spike in perceived buying conditions for durable goods, big-ticket items like refrigerators, cars and other products meant to last.
“This is not a sign of strength. People think it’s a better time to buy durables because they are expecting prices to skyrocket next year — and they want to avoid that,” said Hsu.
Republicans, on the other hand, don’t think it’s a good time to buy durables, Hsu said.
Consumer spending powers the economy
Trump has repeatedly argued that his unprecedented trade agenda will not reignite inflation. And his defenders have portrayed his tariff threats as part of a negotiating strategy, not necessarily what will ultimately take place.
Still, the University of Michigan survey found that year-ahead inflation expectations across all consumers increased in December to six-month highs, though they remain well below recent highs.
Although partisan splits in consumer sentiment have existed since at least the Reagan administration, Hsu said they became more pronounced under Trump.
In theory, these gaps could have significant consequences for the US economy, which is driven in large part by consumer spending. If one part of the country hunkers down and slashes spending at the mall or on vacations, that would hurt businesses and lead to layoffs.
Of course, just because people say they are worried about the economy once their party is voted out of power, doesn’t mean they will actually change their spending behavior.
Case in point: Americans of all political stripes spent aggressively on Cyber Monday, shelling out a whopping $13.3 billion in the biggest online shopping day on record.
The-CNN-Wire
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