The American economy — certainly the part that depends on consumers — appears to be picking up steam as the presidential campaign heads into its final weeks.
The latest bit of new economic information suggested people were spending more on almost everything. Retail sales climbed 1.1 percent in September, after declining 1.2 percent in August. “Spending was broad and very strong across the board,” says economist Chris Christopher at IHS Global Insight in Lexington.
The economy — and where voters believe it is headed — obviously plays a leading role in this year’s campaign. The candidates will be debating foreign policy Tuesday evening, but pocketbook issues matter much more to voters.
Improving economic trends are certainly welcome news for the president, but it’s unclear how much upticks very late in the campaign matter and whether they can help an incumbent overcome the cumulative effect of four hard years.
Two presidential election models based heavily on economic factors spit out different winners. One suggests a clear victory for Mitt Romney in the popular vote while another favors the president in the electoral college count.
“The economy is improving and, in the last few weeks, it feels like it’s picked up the pace,” says Mark Zandi, chief economist at Moody’s Analytics. “Everything related to the consumer has taken on a somewhat brighter tone. But it’s still far from what anyone would be comfortable with. That’s why the models and the polls are so conflicted.”
Still, the latest trends clearly point to a more upbeat mood among consumers. The cumulative effect of many positive reports is convincing.
The new retail sales numbers followed a report last week showing consumer confidence at its highest level in five years. A preliminary measure of the Thomson Reuters/University of Michigan consumer sentiment index for October registered at its highest level since September 2007. Earlier, a Conference Board report on consumer confidence in September showed improving levels but still well below 2007 heights.
Meanwhile, more economic reports continue to track improving individual markets. Sales of existing homes hit a two-year high in August. Sales of cars and trucks in September, adjusted for seasonal differences, were the best in four years.
Reports on jobs were so positive they became a controversy all their own. The unemployment rate for September fell to 7.8 percent and launched Jack Welch’s silly conspiracy theory tweet. Then new weekly jobless claims fell to a 4¼-year low last week, prompting allegations California failed to publish all its claims.
In fact, many economists question whether the jobs outlook is really improving as much as those numbers suggest. They point to quirks in the system — not conspiracies — that may have exaggerated the trend. But most still think the jobs outlook continues to improve slowly.
All those positive — but late — blips on the economic monitor didn’t change much in the election model run by IHS Global Insight. The model, updated earlier this month, forecast the president would win just 45.3 percent of the popular vote.
IHS doesn’t count the results of its election measurements as one of its official forecasts and says closer political polls suggest noneconomic factors may be playing a bigger role in this year’s presidential campaign.
Another model, run by Moody’s Analytics, which also emphasizes economic data, suggests Obama will win 303 electoral votes, well above the required 270. The Moody’s model, last updated in late September, had already anticipated weak third-quarter economic growth.
Meanwhile, more measures of the economy are posted every week, and two big reports are due before the election. A final unemployment report could influence voters. News on the country’s gross domestic product during the third quarter will animate pundits but probably do little to sway voters.
Many people already have clear impressions of the past four years — as a struggle against enormous economic problems or an era of poor leadership during hard times.
But for many voters — especially those in the middle — questions about the past aren’t as important as impressions of the future. Where we are headed matters more than where we have been.
The recent trends are modestly upbeat. But you have to look deep into our economic hole to see them.