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Pre-Election Spotlight on the USA: Impact on Consumers

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October 25th, 2016

All eyes are on the USA in the coming month as the country is embroiled in one of the most controversial US elections in history. The outcome of the November 2016 Presidential election will have global repercussions, given the USA’s status as the largest consumer market globally, accounting for US$12.0 trillion in 2015. The Consumers team turn the spotlight on the USA, from the Digital Consumer, Households, Income and Expenditure, Lifestyles and Population angles. Insights include a Clinton promise to address the country’s broadband access inequality; the purchasing power of childless couples to be hit by a Trump win as well as a slowdown in the expansion of the richest income segment; growing cynicism of the US population towards politicians; and the shrinking of the labour force as a result of potential immigration curbs.

Digital Consumer: A Clinton win promises all US households access to affordable broadband by 2020

With regard to proposed election policies that could affect digital connectivity, Clinton has outlined detailed plans, including support of net neutrality and the expansion of broadband access. In fact, Clinton has pledged that all households will have access to affordable broadband by 2020. While the US is among the most digitally advanced globally (ranking 3rd out of 50 countries in Euromonitor’s 2016 Digital Consumer Index), the country’s vast land area has made it difficult to extend fixed broadband and left large swathes of rural America without access. Clinton also said she wants to incentivize competition in broadband space and will accelerate the rollout of 5G wireless services. In contrast, Trump has provided little guidance on his digital initiatives with the exception of voicing opposition for net neutrality, which he believes will target conservative media.

US Broadband Internet Access by Region: 2016 and 2021

us-broadband-access

Source: Euromonitor International from national statistics

Households: Childless couples’ purchasing power to be hit by a Trump win

Trump’s proposed tax amends will have a major impact on household heads in the USA. Although the plan is largely aimed at cutting taxes for all income groups, the resulting fall in federal revenues would undercut subsidies and tax exemptions for childless couples that itemise and unmarried couples with dependents. These groups in particular will end up receiving fewer benefits and paying more tax. Since childless households are the fastest growing household type in the country, this hit to purchasing power would significantly hinder consumption. Households made up of couples with children in the USA are expected to see the strongest increase in household expenditure over 2015-2020, boosted by tax breaks and more earning potential from two resident adults.

Household Expenditure by Household Type in the USA: 2015 and 2020

us-household-expenditure

Source: Euromonitor International from national statistics/Eurostat/UN/OECD

Note: 2020 figures are forecast; data in current US$ terms

Income and Expenditure: Slowing expansion of the top income-wealth segment

As Trump’s economic policy favours protective foreign trade, with proposed high import taxes, costs to US businesses and consumers are expected to rise as a result of a Donald Trump Presidency, with negative knock-on impact on consumer confidence as well as their income and wealth. In particular, the Trump effect will be keenly felt by the top income-wealth segment in the USA – something that is perhaps unintended and unexpected, given that Trump’s proposed tax cuts are aimed at higher earners. Euromonitor International forecasts that the number of adults with an annual disposable income above US$50,000 and total wealth in excess of US$200,000 (both in constant terms) will expand at a more modest rate as a result of a Trump Presidency. This is because in the Trump Downturn scenario, US economic activities are expected to decline, which will then lead to a falling stock market and impact the top of the income-wealth distribution more adversely than the middle and bottom segments. The number of adults in this top income-wealth segment will reach 38.5 million in 2020 in the Trump Downturn scenario, down from Euromonitor’s baseline forecast of 42.4 million. The total wealth accumulated by this group will expand by 29.0% in real terms in 2025 over 2015 in the Trump Downturn scenario, considerably lower than Euromonitor’s baseline forecast of 54.4% real growth for the same period.

Income – Wealth Distribution in the USA: 2015-2025

wealth-distribution-in-the-us

Source: Euromonitor International’s Income and Wealth Distribution Model

Note: Data for 2016-2025 are forecast

Lifestyles: US politicians may be dominating the news cycle, but they do not trump Americans’ hearts

The US Presidential election is dominating news cycles, as emotions run high and fear for the future of the country surges at the prospect of a rival party’s candidate winning. In spite of this media attention, many Americans feel little admiration for the politicians they see in headlines, ads, news coverage, and rallies. In 2016, only 3.9% of US respondents said they look up to political leaders and consider them among the top role models in their lives. That is the lowest level of respect recorded in Euromonitor’s Global Consumer Trends survey since it began in 2011, when 5.9% of Americans said they looked up to political leaders. What is more, respect for politicians wanes the longer people are exposed to political successes and crises in the news. Young people in Generation Z are three times more likely than Baby Boomers to say they look up to political leaders, but even they are quite cynical: 7.0% of 15-19 year olds cited political role models, compared to 2.0% of 50-65+ year olds.

Role Models among US Consumers by Age: 2016

us-role-models

Source: Euromonitor International Global Consumer Trends 2016 online survey

Population: Curbing immigration will shrink the labour force and harm the economy

Plans to curb immigration are a cornerstone of the Trump Presidential campaign, but such a plan will hurt the US economy in the long term. In 2015, foreign citizens accounted for 6.8% of the total population in the USA. Already, despite increased net migration, population growth in the USA is forecast to slow down in the period through to 2030 due to declining natural change. Consequently, the labour force is set to age and also grow at a low rate of 4.2% between 2016 and 2030, significantly down from the 13.1% recorded in the previous 15-year period. Trump’s immigration policy will effectively halt the forecast weak growth, if not shrink the US labour force, with the negative impact to be felt on both supply and demand.

Change in the US Labour Force: 2001-2015 and 2016-2030

us-election-consumer-population

Read more in Pre-Election Spotlight on the USA: Impact on Economies

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An Hodgson

An Hodgson joined Euromonitor International in 2006. She manages research into income and expenditure as well as industry, infrastructure and environment. Her strategic analysis helps businesses gain important insight into global, regional and key emerging market trends and thereby allowing them to make more informed commercial decisions.

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