Corporate sentiment in the U.S. economy has turned upward for the first time since 1Q 2022. The rise mirrors a recently announced consumer confidence lift. Together with improving employment and corporate earnings data, the measures point to an optimism for the U.S. economy that could have implications for the upcoming presidential election as well as for political maneuvering beforehand.
CEO Sentiment
The Conference Board Measure of CEO Confidence polled CEOs from across the United States. Of these CEOs, 32% claimed that economic conditions were better than they were a half-year ago. This is up from 18% in Q4. The rest included 22% who claimed that conditions were worse. This is a drop from 32% in Q4.
Moreover, the longer-term perspective also seems brighter for more executives. Those expecting a downturn in 2024 dropped, from 29% in 4Q2023 to 20% in the latest report. U.S. political uncertainty ahead of the 2024 presidential elections is rising, and globally, the spread of existing wars is the primary problem for 46% of respondents.
Consumer sentiment
Consumer sentiment, as measured in the University of Michigan Index of Consumer Sentiment, has risen 28% in three months, and now stands at 78.8 points. Axios points to dropping prices for fuel as well as rising equity markets as fuel for the improvement in sentiment.
The sudden shift in sentiment has reversed a trend that began with the COVID-19 lockdowns, when consumers began to look down on their environment after record high optimism.
Political consequences
The rapid turnaround in both consumer and CEO views of the U.S. economy has consequences. Axios confides that, “Investment bankers keep an eye on measures like these because when the CEOs are feeling good, they’re more apt to get into some deal-making.”
An even more significant effect is how the public perceives presidential candidates, especially the incumbent. In this case, though, both President Biden and former president Trump will try to make the case that the improving economy is their doing.
While the mantra, “It’s the Economy, Stupid”, has been a staple of non-conservative voters for 30+ years, in this election cycle, it is possible that a relatively healthy economy will allow other factors to come to the fore.
Within Congress, it will be more difficult for Republicans in the House of Representatives to make the case that they are responsible for the rather soft turnaround of the economy. The disarray among House Republicans will now only be highlighted with comments that while they were bickering, the country moved on. At the same time, President Biden’s gaffes and memory loss issues might now become a stronger focus, in part to distract voters from the economy.
