Political polarization has increased, with social media fuelling a shouting match between political caricatures. Unfortunately, this polarization is increasingly messing up economic data.
University of Michigan consumer sentiment is broken down by political affiliation. Ask a Democrat about the economic outlook today, and they say it is better than at any point in US President Trump’s administration. Ask a neighbouring Republican, and the same economic outlook is almost the worst it has ever been.
A simple correlation between US business sentiment and Republican and Democrat consumer sentiment shows political polarization may affect business sentiment too. Using the data available, the level of the NFIB small business survey is extremely strongly correlated with Republican consumers’ view of the economy. The NFIB survey has no significant correlation with how Democrats view the world. However, the ISM business sentiment survey is quite strongly correlated with Democrats’ economic views, but has a very weak correlation to the Republican perspective.
These correlations are simple to run in the US. The data is available, and a bipartisan political system makes it easier to identify polarized viewpoints. But political partisanship is likely in other economies’ survey data. It raises questions about what the surveys are saying, and how sentiment might react to elections and other political events.