Biden world braces for consumer sentiment survey
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For some Biden advisers, the University of Michigan's consumer sentiment survey, which drops Friday morning, is becoming perhaps the most important economic reading of the month.
Why it matters: For President Biden to win reelection, voters need to feel the economy is as good as Wall Street, the International Monetary Fund, and Treasury Secretary Janet Yellen insist it is.
Driving the news: The Michigan number will give the White House direct feedback to a question it's dying to know: are voters buying Biden's argument that the economy is humming?
- Over the last three months, the Michigan reading — along with the Consumer Confidence Index (CCI) — have brought into focus something the White House has been squinting to see: a happy, healthy consumer.
Zoom out: In the political world, the monthly jobs number used to be the main economic event of the month.
- That was especially true during President Obama's reelection campaign, with officials eager to bring the unemployment rate below 8%.
- With inflation surging in 2021, the release of the Consumer Price Index (CPI) replaced the jobs report as the most anticipated data drop by the U.S. government, Axios reported at the time.
- The CPI flashed at 3.1% annual rate in January, down from its high of 9.1% in June of 2022. Administration officials have become increasingly confident that a soft landing, where inflation comes down and unemployment stays low, is possible.
Yes, but: While the CPI provides a broad measure of inflation, by tracking the prices of everything from fuel to frankfurters, it doesn't report how consumers actually feel.
Zoom in: The preliminary Michigan survey shows that sentiment flatlined in February, disappointing some Democrats who were hoping for the same double digits expansion the report showed in December and January.
- Meanwhile, after three monthly increases, the the Consumer Confidence Index declined in February.
- Flat February numbers — from either Michigan or the CCI— don't amount to flashing red lights for the economy. But they are politically problematic.
What they're saying: Officials seized on the small increase, 79 to 79.6, in the preliminary Michigan numbers as a reason to celebrate.
- "Today's report shows that consumer sentiment has turned the corner — up by 30 percent over the last three months, the fastest increase in 30 years — reflecting the increase in real wages, wealth, business creation, and job opportunities under President Biden's leadership," Lael Brainard, the director of the National Economic Council, said in a statement.
- Other administration officials are also pleased with the overall trend. "Consumer confidence is up 8% over the last 4 months, and is 16% higher than the average in the decade before the pandemic," one official said. "It's also higher than at this point under Presidents Obama, Bush, Clinton and Reagan."
Between the lines: Hard-boiled economists, including those at the Fed, don't actually pay that much attention to CPI.
- They prefer something called the Personal Consumption Expenditures. And PCE is indicating that inflation might take longer to beat than previously expected.
- And while some economists might give a passing glance to the Michigan and Conference Board numbers, they think of those as private surveys — and not real government data.
The bottom line: While Biden's economists may not obsess over the consumer sentiment and confidence numbers, his political advisers do.
