With voting day finally here, what can the state of the US economy tell us about tonight’s result? While the United States has been hit hard by Covid-19, the country’s economy is showing signs of improvement – and the latest stats could be good news for Donald Trump in his bid to defy the odds and win re-election.
GDP figures for the third quarter of 2020 (published last week) show a spectacular rebound for annualised GDP: 33.1 per cent between July and September. This amounts to a 7.4 per cent increase from the previous quarter, the fastest growth the US has seen in its post-war history.
According to Capital Economics, the recovery can be credited to a 40.7 per cent rebound in consumption, as Americans ventured back outdoors and returned to their old spending and consumer habits in the summer months. Business confidence also increased, with equipment investment up 70.1 per cent, while residential investment increased by 59.3 per cent, according to the independent consultancy group.
The economy has by no means recovered. It remains 3.5 per cent smaller than it was at the end of 2019, and there is increasing concern that recovery will slow heading into the Q4. Another surge of Covid-19 infections in the States has slowed mobility again and cooled the resurgence of hospitality and leisure, according to Oxford Economics. In this sense, the Q3 figures – while record-shattering – may not wholly reflect the state of America’s economy. The question, then, is whether or not Americans are feeling the financial gains that these figures would suggest.
Familiar with the disastrous Q2 numbers – in which the economy contracted 31.4 per cent between April and June – rather than the significantly more positive data recently published is likely to spell bad news for Trump. But polling on handling of the economy may indicate to what extent Americans think the past few months have shown improvement.
Voters still seem to favour Trump, but to a much smaller degree than before the pandemic hit. The Real Clear Politics average shows how the economy is the one metric where Trump has always proved favourable, with more people viewing his handling of the economy positively than negatively since January 2018. However the margin has significantly tightened this year, with less than a point apart between his favourable and unfavourable ratings in August – when the economy would have been experiencing this Q3 resurgence. Trump’s current average shows a 2.1 per cent favourable lead, but it is notably under 50 per cent, a far-from-comfortable showing for an incumbent who is primarily running his campaign on an economic platform.
Meanwhile, Trump’s lead in the polls against Joe Biden on the economy has all but disappeared, with polls now showing ‘statistical dead heat’ between the two candidates, often in the margin of error. In CNBC’s final poll, published yesterday, 51 per cent of voters in swing states rated Trump’s handling of the economy; but on Covid-19, 53 per cent rated Biden and the Democrats instead.
This raises the biggest question of all going into election night: what will drive voters to the polling booths? The pandemic, economic recovery, the personality of the candidates? Even if it is the economy, as it often has been in the past, Trump will need to rely on America’s booming economy pre-pandemic being at the forefront of voters’ minds, rather than this devastating spring.<//>
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