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By Parker Floyd

Measurements like GDP, inflation, and employment rates serve as strong economic indicators. However, these statistics are not always accurate representations of how Americans feel about the economy. Wall Street Journal Editor Aaron Zitner writes “People don’t eat the GDP number” to show how commonplace economic indicators, such as grocery and fuel prices, influence voters’ outlooks on the overall economy. 

The disparity between actual economic conditions and how it is perceived by consumers can be explained by the University of Michigan’s Index of Consumer Sentiment (ICS), which assigns numerical values to Americans’ outlook on the economy. On the heels of the 2024 Presidential Election, the question arises, can voters’ perceptions of the economy impact the outcome of the election? 

May of 2024’s relatively low ICS of 69.1, the upcoming election resembles the 1980 Presidential election between Republican Ronald Reagan and Democrat Jimmy Carter. That November, the ICS was recorded at 76.7, and Reagan went on to win in a landslide. This could hurt Democrats in 2024, the way it did in 1980.

But in the 2008 and 2020 elections, it was a different story. The lowest ICS recorded during November of a Presidential election year occurred in November of 2008 at 55.3, helping Democrats led by Barack Obama to win back the White House.  In 2020, Joe Biden defeated Donald Trump when the November ICS was 76.9, not very helpful for the Republican candidate.

An analysis of Index of Consumer Sentiment scores suggests that voters’ outlooks on economic conditions do affect whether the incumbent party wins re-election. The average ICS during November of election years when the incumbent party won re-election is 90.28, whereas the average ICS when the incumbent party lost re-election is 84.88, which is not a good sign for the Democrats.

These averages suggest that public opinion on the economy might play a role in the incumbent party’s probability of winning re-election. A one-tailed t-test between ICS scores from November of each election year since 1952 in which the incumbent party won and lost re-election revealed a t-ratio of 1.96, which is significant at the 0.05 level. The statistical significance between the ICS scores suggests that as voters’ perceptions of the economy become more positive, the likelihood of the incumbent party’s re-election increases. 

Using the ICS scores from November of every election year since 1952, I performed a statistical analysis to determine if voters’ outlook on the economy affects the party in power. The average ICS when Republican candidates won Presidential elections is 92.84, while the average ICS when Democratic candidates won is 84.33, which suggests that Democratic candidates may be more likely to be elected when public opinion on the economy is largely negative. The results are at least slightly statistically significant.

It seems that rather than focusing on economic indicators such as Gross Domestic Product, employment data, and inflation rates, typical Americans focus more on everyday expenses, such as grocery, gasoline, and retail prices, to shape their perceptions of economic conditions and this is reflected in the Index of Consumer Sentiment (ICS). 

As supported by statistical analysis, it is evident that as Americans lose confidence in the economy, they are more likely to vote for the opposing party in Presidential elections. There is also slight significance to the occurrence of Democratic Presidents being elected during periods of negative economic perception. With the polarizing 2024 Presidential election rapidly approaching, voters’ feelings toward current economic conditions will play a substantial role in determining the next President of the United States.