America’s presidential election—you may have heard—is on Tuesday. One oft-cited quip about how people vote is that “it’s the economy, stupid”, coined by James Carville, Bill Clinton’s political adviser, in 1992. Growing political polarisation means that things are a bit more complicated today. There is, however, no doubt that an incumbent candidate would prefer a roaring economy to a miserable one.
We have written on several occasions about the strength of the American economy, including as the theme of
a recent special report.
The extent to which America has outperformed other countries since the start of the covid-19 pandemic is breathtaking. Its real GDP has expanded by more than 10%, nearly three times as much as the euro area. Among the G20 group, which includes both rich countries and emerging markets, America is the only one where output is above pre-pandemic expectations, according to the International Monetary Fund.
In this week’s issue,
I wrote about how America’s momentum has accelerated
in the final months of the election campaign. Yesterday we learned that its GDP grew at an annualised pace of 2.8% in the third quarter, above its long-term trend and a full percentage point higher than most economists predicted in July, at the start of the quarter. This has translated into substantial benefits for ordinary people, including solid wage growth and resilient spending power. Moreover, inflation has receded: it is just about back to the Federal Reserve’s target of 2%.
That would seem to be an excellent record for Kamala Harris, in effect the incumbent. But more voters say that a Donald Trump presidency would benefit them financially. Why? Polarisation is certainly part of it. The high inflation of the past couple of years has cast a long shadow, too: even if prices are rising at a modest clip now, people still experience sticker shock in stores and restaurants. Many Americans may also be enticed by Mr Trump’s promises to slash taxes, however reckless his ideas would be if enacted in totality.
One piece of evidence that all the gloomy talk does not in fact match lived reality came in a recent survey by the National Federation of Independent Business, a small-business association. About 65% of its sampled members responded that the national economy was in bad shape and just 5% said it was good. As for their own businesses, it was almost the exact opposite: some 58% said their firms’ finances were good or excellent, while a mere 7% said they were bad. In other words, people are upbeat about what they see directly but pessimistic about what they glean indirectly through media (and social media).
Intriguingly, gauges of consumer sentiment have perked up recently, suggesting that Americans may be starting to feel better about the broader economy. More people may be coming to believe that their rosy personal experiences are not outliers but rather are consistent with the national economy. It is good timing for Ms Harris.
With just days left before America’s presidential and congressional elections, market participants are abuzz with discussion of what the various results might mean for everything from trade and defence to tax and regulation. But the Treasury market, which ultimately underpins much of global finance, is of particular interest.
This email has been sent to:
mary@toolebertz.net. If you'd like to update your details please
click here. Replies to this email will not reach us. If you don't want to receive these updates anymore, please unsubscribe
here.
