As the battle for the White House heats up next year, Americans will have a lot on their minds.
From inflation to high interest rates, a slew of economic factors next year could tip the scales for one candidate or another when voters head to the polls in November.
But how will the election actually impact consumer’s wallets in 2024? FN spoke with footwear industry and financial experts to get their predictions for the coming year, and opinions are mixed on how much and when consumer spending will be affected, most agreed that big elections do typically cause some level uncertainty for many Americans.
What Experts Think
According to Matt Priest, president and CEO of the Footwear Distributors and Retailers of America (FDRA), he noted that past studies his organization has conducted found that more movement in spending actually happens the year after an election. “If there’s a new administration with new policies that may impact consumer sentiment, that usually happens once they’re in office,” Priest noted. “But there typically isn’t a strong impact on footwear retail during a ‘normal’ election year.”
Speaking of “normal,” many experts – including Priest – are optimistic that 2024 will bring a normality to the economic cycle. “We’ve heard that from a number of executives, particularly during market week a couple of weeks ago, that expectations for 2024 are that it will reflect a year much like 2019,” Priest said. “We are expecting to see us emerge from a peak of holiday sales, followed by a downward ‘dark days of winter’ period, followed by a pickup in springtime. So it’s all about returning to those historical cycles that have been disrupted over the last three to four years.”
That said, Priest added that external factors like weather, unemployment rates and interest rates are more likely to affect consumer spending in 2024 rather than the election.
Steve Lamar, president and CEO of the American Apparel & Footwear Association (AAFA), agreed that other economic factors will impact spending next year rather than the election. “Everyone is talking about a ‘soft landing’ in order to avoid a recession,” Lamar told FN. “I know experts have thought a lot about the ‘soft’ part, but have they addressed the landing? Will we be able to ‘land’ the economy in a way that will foster solid economic growth that addresses some of our underlying problems like inflation, logistical challenges, high interest rates and labor shortages? These issues make consumers nervous, which in turn affects consumer spending. So it’s important that they’re addressed.”
For analysts, what happens with interest rates is key to how the consumer will react next year. Douglas Porter, CFA at BMO Capital Markets, noted in a recent report that in a year that will be dominated by the election cycle — in the U.S., Mexico, Taiwan, likely Britain, and even possibly Canada — the delayed impact of rate hikes is expected to weigh a bit heavier.
“However, sturdy financial markets, the prospect of rate cuts, cooler energy and food prices, and normalized supply chains all suggest that the global economy will grind out modest growth again in the coming year,” Porter noted. “We are looking for some underlying slowdown overall to around 2.6 percent, with most major economies printing a tad lower than this year, but still keeping global growth just out of recession waters.”
“Even though it’s an election year, fiscal policy is likely to be less supportive than the big boost seen this year—the budget deficit is now above $1.7 trillion (more than 6 percent of GDP),” added Porter. “Consumer spending is also expected to calm amid slower job gains, milder wage increases and with pandemic savings largely tapped out.”
What Historically Has Happened
Data from prior presidential elections paints a similar picture of uncertainty for 2024.
In 2020, which could hardly be seen as a “typical” or “normal” presidential election year given the pandemic and months-long protests, expectations for declines for discretionary spending were minimal.
According to a September 2020 S&P Global Market Intelligence survey, nearly 75 percent of respondents said the election would have no impact on their spending. But looking at the remainder of the respondent pool, the proportion of consumers planning to decrease their spending due to the election was 16.4 percent — more than three times the number of consumers who said they intend to spend more, which came in at 4.5 percent.
Rewinding to 2016, a small dip in spending occurred leading up to Election Day. In 2016, online sales declined 14 percent on the day following the presidential election, according to Adobe Analytics data. And overall sales dropped 9 percent in the weeks prior to the election, regardless of party affiliation, according to Epsilon Abacus data.
Marketing’s Impact
This issue isn’t just about politics. Consumers’ mindsets will also be affected by the barrage of political advertising that will be coming from every direction next year. As U.S. households are bombarded with campaign marketing materials, as well as ongoing TV commercials and online messages from politicians and political hopefuls, data shows a clear decline in consumer spending — especially during presidential elections.
According to a report released three months ahead of the 2020 election by data marketing firm Epsilon, the pace of sales growth is reduced by more than half during the week leading up to the election as compared to the prior month. Moreover, the analysis showed that average transaction values also declined by about 5 percent just prior to Election Day. However, sales and average transaction values quickly recover.
“Marketers should expect a lull in sales leading directly into the election, but they should continue marketing efforts throughout this time because the turnaround in sales comes pretty quickly as the election ends,” Epsilon researchers said in their 2020 report, adding that “as the election comes to a close, consumers turn their focus back to their holiday shopping and spending resumes to ‘normal.’”
Nikki Baird, VP of strategy at Aptos, had a similar outlook. The retail tech company executive told FN that she expects “no real impact” on spending next year. “The only real thing to expect is that advertising prices rise in the leadup to the election because retailers have to compete with campaigns for ad space, and campaigns these days have a lot more money to spend than they used to,” Baird noted.
And retailers can expect a ton of competition when it comes to advertising this year. According to a new forecast, the advertising dollars spent on U.S. elections and advocacy issues will grow to roughly $16 billion next year, up 31.2 percent compared to the last presidential election in 2020. In fact, new projections from GroupM, one of the world’s largest paid advertising agencies, suggest that political ad revenue will reach $15.9 billion in 2024, or $17.1 billion including direct mail.
But Baird remains steadfast in her outlook for retail success next holiday. “Even when elections crowd out retail advertising in the run-up to holiday spending, the election is over soon enough that it really doesn’t stop retailers. They have plenty of time from Election Day to Black Friday to make up for getting turfed out earlier,” Baird added.
