adamkaz As the outcome of the election reverberates through the economy and societal landscape of the country, it also has an impact on consumer spending. Wells Fargo analyst Ike Boruchow examines the trends in softlines spending – clothes, bedding, footwear, jewelry – during the year of a presidential election, and how it will impact an already challenged consumer environment. The short answer as to whether an election year impacts spending is yes. The reasons are more nuanced, and the impact has accelerated over the last 20 years and as the political divide widens. Political division has a direct correlation to election engagement, or more simply put, how much time voters spend on the internet, a distraction from shopping, both on-line and at brick-and-mortar establishments. With an already tough setup into the second half of this year due inventory buildup and increased markdowns, adding a presidential election to the mix that is accompanied by increased political interest, “will likely only make things worse,” Boruchow says, “especially when taken into context of an already rough start to the year,” he adds. The study, which looked at years from 1992 to 2020, initially found that spending increased during the second half of an election year. But by removing “noise” from the years impacted by COVID (which resulted in increased spending as stores re-opened), and years impacted by recessions (i.e., 2008) the study was more conclusive and found that adding an “election element” will make things worse in the softlines category at an already difficult point in the year. The study also found that political polarization increased this impact. From 1992 to 2000 there was minimal impact to spending, but during election cycles between 2004 and 2016 (again excluding 2008), when the political environment became more contentious (during the Bush and Obama administrations) Boruchow noted a “material impact to discretionary softlines spending” in H2 translating into 150-200 basis points of headwind compared to H1. And this headwind is more pronounced on more discretionary categories like sporting goods, furnishings, and jewelry. Not surprisingly, within categories, sporting goods, which includes guns and ammunition, is the most affected category with a 400 basis point impact to spending. Spending on sporting goods is higher in the first half of the year, declining in the second half and turning negative in the fourth quarter. And not surprisingly, background checks on gun purchases according to the FBI’s National Instant Criminal Background Check System (NICS) data, is higher when a Democrat is elected versus a Republican. Furthermore, NICS data showed that during presidential election years, background checks are 100+ basis points higher in the five months leading into an election compared to the rest of the year, and that trend was exaggerated in 2020 due to COVID and the outcome of the election. Another interesting result of the study showed that women’s categories show a larger drop-off in the second half of an election year than men’s by around 60 basis points due to women’s clothes outperforming in the first half of the year, perhaps tied to higher voter engagement among women. Narrowing down the results of Boruchow’s findings, retailers can expect to see a 150-200 basis point headwind to consumer spending in the second half of this year, correlating to more time spent online searching topics tied to the election. “Overall, however, we lean more cautious and believe the impact could be worse (+200bps) given that COVID softened some of 2020’s H2 vs. H1 spending and the actual 2020 effect of polarization and increased political interest on spending could have been much larger than seen in reported figures,” Boruchow concludes.