The preliminary read on America’s marquee gauge of consumer sentiment was very rough for February, and a sharp uptick in near-term inflation expectations was insult to injury.
67.8 on the University of Michigan headline was a seven-month low, and missed consensus by a pretty wide margin. Economists wanted 72.
As the figure below shows, the trend’s suddenly not your friend here or, more to the point, not Donald Trump’s friend. Notably, the mood among GOP households deteriorated for the first time in five months, and independents felt incrementally worse too. Among Democrats, sentiment’s the worst since the pandemic.
“Republicans appear to be moderating somewhat from their immediate surge in confidence following the election, while Democrats continue to worry about the implications of Trump’s economic policies,” survey director Joanne Hsu said Friday.
The headline print missed even the lowest guess from economists, and the expectations gauge, at 67.3, now sits at its most pessimistic levels in 15 months. The survey’s measure of current conditions fell more than five points from January’s final reading.
More concerning for the Fed was a huge jump in year-ahead inflation expectations, which leapt to 4.3%, up a full percentage point from January to the highest since late 2023.
I don’t want to call that a “disaster,” but it ain’t good. Consumers’ near-term inflation outlook is up every month since November.
Notably, expectations at the five- to 10-year point were 3.3% in February. That’s the highest since 2008, and it marks the second month in a row that the preliminary read on that metric printed a “since 2008” high (January’s 3.3% initial reading was eventually revised down to 3.2%).
Not surprisingly, there’s a rather pronounced partisan divide within the longer run expectations series. Democrats expect inflation to run north of 4% over the medium-term while GOP households expect price growth to be just 1.5% over the same period.
Somewhat related, I’ve seen a few articles reporting a poll which shows support for Musk’s influence on Trump is falling. Even among Republicans.
Such as this one:
https://thehill.com/homenews/administration/5129353-gop-support-for-musk-influence-with-trump-falls-dramatically-poll/
It would be interesting to identify particular industries or companies that might be impacted by a skew between Democrats’ and Republicans’ economic sentiment.
TSLA is one that might come to mind. Buyers by now are probably fairly evenly split between Dem and Rep. In 2022, Tesla owners were about 38% Dem vs 30% Rep (per surveys) but I think the gap has been closing. However, even just half your customers feeling glum will hurt, and if some of that half are starting to loathe you . . . in January, TSLA sales fell a lot in the largest EU markets (-54% in Germany, -63% in France, and -12% in the UK). In the largest US market, California, monthly sales aren’t available (to me, anyway) but TSLA sales fell -12% in 2024. For likely unrelated reasons, TSLA’s January sales in China fell -12% in a growing market. Wait, is Tesla still a car company?
What other companies come to mind? It is probably easier to look at retailers with skewed physical store distribution, as done by this blogger https://medium.com/towards-data-science/are-you-a-trader-joes-democrat-or-a-walmart-republican-a7b156131435
Caveat: consumer behavior is often inconsistent with sentiment. Consumers (especially higher income) tend to see the country’s situation as worse than their own, future worries don’t dictate today’s buying, and economic strictures benefit some value/discount retailers.
JohnL The waffle House, Piggly Wiggly and Tractor Supply immediately jump to mind as does Bass Pro Shop/Cabelas.
But the #1 idea must be the place our Dear Leader affectionately mentions now & then: Cracker Barrel.
Avon Products (AVP)?
Manufacturer of some of the finest orange self tanning products.