Episode Details

With voters focused on prices and the economy, our Head of Public Policy Research Ariana Salvatore and U.S. Thematic Strategist Michelle Weaver discuss the consumer trends that could matter most heading into November’s elections.

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Ariana Salvatore: Welcome to Thoughts on the Market. I'm Ariana Salvatore, Morgan Stanley's Head of Public Policy Research. 

Michelle Weaver: And I'm Michelle Weaver, Morgan Stanley's U.S. Thematic Strategist. 

Ariana Salvatore: Today, we'll be talking about the consumer and what recent data could imply for the midterm elections. 

It's Wednesday, July 1st at 10am in New York. 

Last week, Mike Zezas and I caught up on the consumer while he was down at our Consumer Captains Conference. This week, Michelle, I want to talk to you about what your data are saying and get into the implications of all of this for the midterm elections. 

So, maybe we start with the AlphaWise data. What are our surveys picking up when it comes to how the consumer feels about the outlook in the aggregate? 

Michelle Weaver: We run a monthly proprietary survey of around 2,000 U.S. consumers, and it's diversified by age, gender, and region, and we ask questions around sentiment, spending plans, and other special topics. Our survey recently showed a continued gradual recovery in consumer confidence in the U.S. economic outlook. 

We're not off to the races by any means, but we did see the net outlook score improve to -10 percent, up from -14 percent a month ago and a low of -18 percent two months ago, when concerns around oil prices were at their peak. 

Overall, more consumers feel negatively about the economy versus positively, hence that net score is negative. But we are seeing signs of improvement, so things are improving on a rate of change basis. 

Ariana Salvatore: That makes sense given the MOU that was signed between Iran and the U.S. Now, looking forward, what does the survey tell us about spending plans? 

Michelle Weaver: Broadly, consumer spending plans remain stable. They expect to spend more on essentials categories. This includes things like groceries, gas, and household items, while they're expecting to spend less on discretionary categories. We saw the weakest spending intentions within the consumer electronics category, and consumers are not likely to see much price relief in that category. Many consumer electronics makers are now taking their prices up because of the high price of memory chips that goes into those products. 

Ariana Salvatore: One of the most important components of the survey is the question that you ask on top areas of concern. What are you guys seeing there? 

Michelle Weaver: Inflation is still the number one concern for consumers, and we actually saw the percent of consumers citing it among their top concerns tick up again last month. So, now that's at 60 percent, up from 59 percent last month, and a low of 53 percent in January. People are also worried about the U.S. political environment. That was cited by 42 percent of consumers, up from about 39 percent last wave. Concern around geopolitical conflicts rounds out the top three, but that level's been pretty stable around 25 percent. 

But Ariana, can consumers expect any relief on prices from the policy front? Consumers got a nice boost from tax refunds. Is there anything else in the pipeline? 

Ariana Salvatore: So, we've gotten this question a lot into the midterm elections, and our view is basically that there are a number of obstacles in the way of something like another reconciliatio