Biden's Problem: Consumer Confidence is Near its Lowest in a Decade

Anxiety over the cost of living and the direction of the economy could have negative consequences for President Joe Biden and his fellow Democrats in Tuesday’s election.

Recent surveys show that consumer sentiment has only risen modestly and remains well below where it was a year ago, when inflation worries first began to grip policymakers, shoppers and business executives.

A report released Friday has shed light on the challenges facing the ruling party in Washington. The University of Michigan's monthly sentiment survey, which is closely watched by analysts, asked respondents which party they trust more when it comes to the economy and which would be better for personal finances.

The outcome of the election was overwhelmingly in favor of the Republican party.

A survey of 1,201 respondents found that Republicans have a 37%-21% advantage over Democrats when it comes to which party is better for the economy. While 37% of respondents said it doesn't make a difference, the disparity between those with a preference is significant. (The survey did not distinguish whether respondents were likely voters.)

The only demographic group that favored the Democrats was the party group. All other groups, including age, household income and education, favored the GOP.

The Michigan survey saw a reading of 59.9 for October, which is 2.2% better than September but 16.5% below the same period a year ago. This is just off its all-time low in June 2022 and is running close to its lowest level in more than 11 years, according to data that goes back to 1978.

Greg Valliere, chief U.S. policy strategist at AGF Investments, who specializes on the impact of politics on the financial markets, said that the economy dwarfing every other issue is a huge problem for Democrats. He said that they didn't do anything about it after seeing enough evidence since Labor Day, including not saying the right thing or showing enough empathy. Valliere called it a really sorry performance.

According to Valliere, the issue could become so large that Biden may have to announce soon that he will not seek a second term in 2024.

The Democrats are facing a lot of challenges right now, according to the speaker. He went on to say that he thinks the party has a lot of problems.

Consumer confidence in housing is at an all-time low, with just 16% of respondents saying they think now is a good time to buy, according to a Fannie Mae survey that goes back to 2011.

Historically, when the party in power has been associated with readings like this, it has not boded well for them.

Former President Donald Trump lost his bid for re-election in 2020 when the Michigan poll was just above its early pandemic low. In contrast, Barack Obama won re-election in 2012 when the survey was riding a five-year high. George W. Bush captured his bid for a second term in 2004 when sentiment was middling, but Bill Clinton triumphed in 1996 when the Michigan gauge was at a 10-year high.

In the 2010 midterm election, the Obama-Biden administration lost 63 House seats, the biggest rout since 1948. The reading for congressional control was at 71.6, only narrowly better than the year before when the economy was still climbing out of the financial crisis.

Today, people are especially worried about inflation.

Inflation expectations for the next year rose in October, after two months of decline. The one-year outlook stood at 5%, up 0.3 percentage point from September. This is the highest reading since July. The five-year outlook also rose, to 2.9%. This is tied for the highest level since June.

The University of Michigan survey found that respondents had more trust in Republicans when it came to the fate of their personal finances.

The GOP held a significant lead against Democrats in the category of support from independents.

The survey showed that Republicans are expected to win the upcoming election and take control of Congress back from the Democrats.

Republicans did much better among those with a high school diploma or less when it came to both the economy and personal finance. Those with a college degree gave the GOP an 8-point edge on the economy and a 10-point advantage on personal finance.