What does the consumer confidence index use to predict presidential election results?

The news that consumer confidence just reached a seven-year high should spell some relief for Democrats heading into next week’s midterm elections, right? After all, if the takeaway is that voters are feeling better about their pocketbooks, they should be expected to go easier on the president’s party.

Well, not exactly.

Historical data suggest the level of consumer confidence is a better predictor of election outcomes than the direction of the sentiment. And the magic benchmark in the Consumer Confidence Index that the incumbent party needs to hit is 100.

Yesterday, the Conference Board, which publishes the measurement, placed the October number at 94.5. In nine of the 11 presidential races since the group started compiling the data, back to 1968, if consumer confidence topped 100 going into the election, the incumbent party won the White House. The only exceptions: 1968 itself, when consumer confidence registered a towering 142 but Vietnam-weary voters elected Richard Nixon to replace LBJ; and 2000, though Al Gore won the popular vote as consumer confidence soared at 143.

So, what does a reading of 94.5 suggest? “That this will be more of a Republican year than a Democratic year, but not wildly so,” says Cliff Young, the U.S. president of public affairs for IPSOS, a market research company. That is, we don’t appear primed for a repeat of the last midterm elections, in 2010, when consumer confidence was bottoming out at 49.9 and Republicans made major gains.

In a nip-and-tuck election, that doesn’t necessarily tell us a lot about, say, who’ll end up in control of the Senate next year. But there is another fascinating predictive trend buried a little deeper in the numbers. As it turns out, people’s feelings about the economy and where it’s headed around the time of the midterms line up strikingly with which party captures the presidency two years hence. When people have expected things to get better, the incumbent party almost always goes on to the White House. In 1974, for example, consumers’ “present” attitude registered at 61.4, while their expectations were 12 points lower. Two years later, Jimmy Carter recaptured the presidency for Democrats. Conversely, in 1982, though confidence was ebbing at 17.8, consumers had far higher hopes, by a nearly 61-point margin, and a landslide returned Ronald Reagan to power two years later.

Remember, this correlation is not bullet proof. And there’s no guarantee that this relationship will continue to ring (mostly) true. To date, there has been one election in which the connection fell apart: The 1994 consumer snapshot revealed a shallow pessimism, as expectations dipped three points below consumer sentiment at the time, and Bill Clinton nevertheless engineered an easy reelection victory two years later. If the lesson for presidential aspirants is to be wary when the measures are closely bunched, the 2016 Democratic nominee (ahem) should be cautiously hopeful. The latest reading has expectations barely outpacing the current mood, by 1.3 points.

Abstract

Economic conditions, the story usually goes, influence consumer confidence, which in turn influences both political evaluations and votes. But we have little sense of the origins of consumer confidence itself. It is generally assumed that monthly reports of the nation's level of consumer confidence respond to objective economic conditions. We argue that politics is important for understanding consumer sentiment beyond what we know from economic conditions. Specifically, we demonstrate a direct effect of political evaluations of the president's management of the economy, the party of the president, extraordinary political events, and monetary policy, as well as an indirect effect of media coverage of the economy, on consumer sentiment, after controlling for economic conditions. When news coverage is positive, citizens give favorable evaluations, leading to more positive sentiment. Our findings suggest that understanding the political economy requires an emphasis on the causal effect of politics as well as economics.

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The American Journal of Political Science (AJPS), published four times each year, is one of the most widely-read political science journals in the United States. AJPS is a general journal of political science open to all members of the profession and to all areas of the discipline of political science. JSTOR provides a digital archive of the print version of American Journal of Political Science. The electronic version of American Journal of Political Science is available at http://www.blackwell-synergy.com/servlet/useragent?func=showIssues&code;=ajps. Authorized users may be able to access the full text articles at this site.

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The Midwest Political Science Association, founded in 1939, is a national organization of more than 2,800 political science professors, researchers, students, and public administrators from throughout the United States and over 50 foreign countries. The association is dedicated to the advancement of scholarly communication in all areas of political science. Each year the association sponsors a three-day conference of political scientists in Chicago for the purpose of presenting and discussing the latest research in political science. More than 2,000 individuals participate in this conference, which features 300 panels and programs on politics. The MPSA is headquartered at Indiana University. For further information, contact William D. Morgan, Executive Director, email: .

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