Macroeconomics

Consumer confidence index

Linguistics

Philosophy

Communication

Government (linguistics)

Astrophysics

Economics

Market economy

Computer science

Variation (astronomy)

Physics

Recession

Psychology

Public economics

Government spending

Sociology

Welfare

Consumption (sociology)

Sentiment analysis

Affect (linguistics)

Machine learning

Consumer spending

Social science

American Economic Journal Macroeconomics

We seek to identify the causal effect of sentiment innovations on consumption. Using unique Australian consumer sentiment survey data, we show that, immediately after elections with a change of government, supporters of the winning party report substantially more optimistic beliefs about economic conditions than supporters of the losing party. We argue that this variation in beliefs is orthogonal to changes in fundamentals and find robust evidence that the shifts in sentiment affect spending intentions. Furthermore, using geographic variation in sentiment, vote shares, and automobile purchases, we find evidence that stated spending intentions are indicative of actual spending. (JEL E23, E24, E32, F44, L16)

The Effect of Consumer Sentiment on Consumption: Cross-Sectional Evidence from Elections