Consumer sentiment for October comes on strong

 Consumer sentiment remained virtually unchanged from the first half of October (+0.6 points) and was insignificantly different from last month's figure (+1.4 points). Fear and loathing produced this false sense of stability. Fears were generated by rising covid infection and death rates, and loathing was generated by the hyper-partisanship that has driven the election to ideological extremes. Moreover, the impact of the covid virus and the extremes of hyper-partisanship will continue long past next week's election, with the potential to permanently alter the economic and political landscape. As noted when Trump won over Clinton in 2016, the economic expectations of Republicans and Democrats shifted in opposite directions and by large amounts given that two-thirds of all consumers incorrectly anticipated a Clinton victory. Since a Biden win over Trump (53% vs. 42%) was anticipated in the October survey, it should be no surprise that optimism among Democrats about their future finances rose substantially compared with Republicans. Importantly, for the first time in nearly four years, the financial expectations of Republicans and Democrats were nearly equal (see the chart). Compared with three months ago, the Expectations Index rose by 50% among Democrats but just 7% among Republicans. The outcome of the election can accelerate or narrow these partisan shifts, but unlike the 2016 election, renewed optimism now requires progress against the coronavirus and mitigating its uneven impact on families, firms, and local governments.