Amid a feud with Harley Davidson, an iconic American company, President Trump highlighted his economic policies at a groundbreaking for a massive $10 billion factory complex that may bring thousands of jobs to a state he barely carried in 2016. (June 28)

Republicans aren’t just more confident about the economy than Democrats under President Trump. That confidence seems to be translating into more purchases at the cash register.

And when Trump makes corporations and markets nervous, as he has done recently by ratcheting up trade tensions with other countries, Democrats are more likely to worry about the effects of his bare-knuckled approach and rein in spending.

“Particular ideology is placing an increasingly prominent role in how people are evaluating the economy,” says Chris Jackson, vice president of Ipsos, the market research and polling company. “And there’s a certain extent to which consumer spending can be shaped by political sentiment.”

In June, 66% of Republicans felt more comfortable about making a major purchase, such as a home or car, than they did six months earlier, according to a monthly Ipsos survey. Just 44% of Democrats felt more comfortable. There has been a similar disparity, reflecting more bullishness by GOP members, since at least last summer, Ipso figures show. Broadly, across the economy, Ipsos has found such sentiment typically affects actual sales, at least to some degree.

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Equally telling is the share of Democrats feeling less comfortable about making a major purchase jumped from 46% to 56% in June. The portion of Republicans feeling less comfortable also increased but less sharply, from 27% to 34%.

Cooling confidence for some

Jackson says the cooling of confidence in June is likely related to intensifying U.S. trade standoffs that have roiled stocks. Last month, Trump slapped tariffs on steel and aluminum imports from Canada, Mexico and the European Union. He also has threatened tariffs on auto imports.

Anthony Williams, 49, of Phoenix, is a moderate Democrat who opposes Trump’s policies, including the tax cut that he worries will swell the federal deficit. But he says he didn’t change his spending habits until the trade skirmishes escalated recently.

“If trade disputes become trade wars and the economy becomes really bad, that can affect a lot of companies,” says Williams, an IBM employee who works on cybersecurity technology. “When (other companies’) business slows down, our business slows down.”

As a result, Williams, who typically saves about 35% of his six-figure salary, recently decided to sock away even more to gird for a possible downturn. He’s eating dinner out twice a week, down from at least four times. And he has decided to put off a trip to Portugal he planned to take in September.

“I have this fear that if the economy went bad, it might be difficult to find another job,” he says.

New car and a kitchen remodel

Gene Young, 63, of Sioux Falls, S.D., a staunch Republican, has the opposite view. “We do feel better and more confident today than before the election,” he says.

The tax cut is leaving him with more money in his paycheck. Plus, “it seems to us the administration is trying to run the country like a business,” says Young, editor of a publication for a local Catholic diocese.

While Young and his wife, Sarah are generally prudent about purchases, they’re optimistic enough about the economy to spend all of Gene’s recent 2% raise rather save half as they’ve traditionally done. They plan to buy a new car to replace their 2000 Dodge Stratus and remodel their kitchen and bathroom.

Young worries Trump’s trade policies could hurt South Dakota soybean farmers but he adds, “I’m not sure how that’s going to play out… It’s not changing” his spending practices.

Meanwhile, other Trump policies, such as rolling back climate change rules, are helping energy and manufacturing companies whose employees tend to vote Republican, says Mark Zandi, chief economist of Moody’s Analytics.

Spending picks up

Overall, consumer spending picked up in the second quarter after a weak start to 2018 and it’s expected to be solid the rest of the year amid healthy job and income growth, as well as the tax cut.

Differences in spending between Republicans and Democrats don’t primarily appear to be income-related. Last year, 32% of survey respondents among households earning $150,000 and above were Democrats compared with 27% who were Republicans, according to Pew Research Center. And 31% of respondents in households earning $100,000 to $149,000 were Democrats vs. 28% who were Republicans. Republicans, however, have the edge in families earning $75,000 to $99,000 — by 32% to 28%.

Early last year, the University of Michigan began tracking a shift in its consumer sentiment survey, with Republicans voicing more confidence in the economy and their financial conditions than Democrats, reversing the trend under President Obama.

The Ipsos survey, however, more specifically captures divergent approaches to spending.

“It does make some sense that Republicans, given that their confidence is high, are willing to spend a little more,” says Chris Christopher, an IHS Markit economist who specializes in consumer spending. IHS, he says, has found the correlation between confidence and purchases is especially strong for big-ticket items like cars and TVs, as well as clothing.


President Donald Trump’s decision to impose tariffs on imported steel and aluminum has resulted in retaliation from the country’s closest trading partners, which at least one analyst warns will cost American jobs. (June 26)

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