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How Does the Election Affect Consumer Sentiment

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By Sasha ViaSasha, Contributor

In September, consumer confidence in the U.S. recovery rose to its highest levels in nine years. The New York Times reported that, “Consumers’ views about current economic conditions and expectations about future economic conditions both rose in the survey, a development which economists said should help boost consumer spending and the overall economy in coming months.”

That’s exactly what retailers have been wanting to hear. They hope to build on last year’s revenue growth of 7.9 percent in the period from Black Friday to Christmas.
They have good reason to be anxious. Consumer spending tends to slow down after an election. Over the past four decades, the only exceptions to that rule were in 1980 and in 1992. This election year has not been normal by any standards, so it’s worth looking into what other factors might influence consumer spending this holiday season.

In a survey of retailers by the National Association for Business Economics, 11 percent of retailers said that were putting off adding employees or making any other decisions about investment decisions until election results are posted. Over 50 percent said that they expect the election to tamp down economic activity for the rest of the year.

The Election Might Not Matter

Republic Business Credit CCO Robert Meyers recently proposed that original branding and customer-centric strategies will have a bigger impact on revenues than whatever happens this election cycle.

Meyers said, “Apparel manufacturers will struggle to differentiate their online brand in an increasingly crowded marketplace. Retailers that focus their positioning and presence will appeal more to the increasingly informed consumer. As for the presidential election, it has not affected retail sales yet and would only impact sales if consumer confidence decreased due to uncertainty. Our clients tell us that during increasing uncertainty, flexibility and responsiveness are paramount.”

Given the positive trend in consumer confidence over the past two months, this suggests that, overall, retailers will be looking at Christmas sales at least as good as last year.

One more consideration is that regardless of who is elected the Obama administration will still preside over the economy until January. The conservative-leaning magazine, The National Review, admitted that economic growth has traditionally been 1.8 percent higher under Democratic administrations.

If Democrats retain control of the White House in November, you could see consumers and businesses start to settle in with the assurance that they are not likely to see major disruptions in economic policy. However, until the dust settles and Presidential winner is clear, the uncertainty is likely to bring less aggressive investment and depressed consumer spending. That especially true for investments related to supply chains, given the Republican nominee’s statements on trade and international relations.

Demographics Beat Politics

In the end, the characteristics of millennials, now the nation’s biggest spenders, may override the political outcomes. Only 15 percent of millennials say that there’s a good chance that they will vote. Less than half (41 percent) have definite plans to vote. Whatever the reason for this generational disengagement, the election just isn’t as important to them as their online networks. Brands that want to maximize sales this year may be better off appealing more directly to millennial shoppers and ignoring politics entirely.