While consumer expectations increased slightly in October month over month, it was especially pronounced among Democrats who became much more optimistic about their future finances just days before the presidential election.
Democrats are increasingly more likely to think they’ll be better off financially a year from now. Their expectation for their future finances increased by 12% since August, while Republicans’ expectation decreased by 7% for the same period, a survey from the University of Michigan found.
The substantial rise in optimism among Democrats about their future finances is likely based on the Democratic presidential candidate Joe Biden’s lead in the polls, according to a note from Richard Curtin, the chief economist of the Surveys of Consumers at the University of Michigan.
“Democrats do think the economy will be better under Biden,” Dean Baker, chief economist at the Center for Economic and Policy Research, told Yahoo Money. “Democrats are getting more optimistic and Republicans — many of them — are now expecting that we're going to have a Biden administration [and] are becoming considerably less optimistic, so inevitably there's some point where they cross.”
This is the first time in nearly four years the financial expectations of Republicans and Democrats are nearly equal. The broader Expectations Index — which includes questions not only about consumer finances, but also about business conditions — rose by 50% among Democrats in the last three months, compared with an increase of just 7% among Republicans.
“Not a surprise that Republicans think the economy would be worse under Biden,” Baker said. “What is interesting is that apparently — at least in this context — they're indicating that they do think Biden will win.”
While the election outcome will accelerate or narrow the partisan shift in financial expectations, how Americans view their future financial prospects will also be closely tied to the pandemic and the economic recovery, Curtis said in a note.
“Unlike the 2016 election, renewed optimism now requires progress against the coronavirus,” he wrote, “and mitigating its uneven impact on families, firms, and local governments.”