Patrick Watson: US voters 'living in their own realities' including on the economy

With a United States presidential election looming in November, Patrick Watson, Senior Economic Analyst at Mauldin Economics, says it's difficult to say what the key economic battleground will be because many voters are "living in their own realities."

Speaking in a new episode of interest.co.nz's Of Interest podcast, Watson says there's not a great deal of agreement on whether the US economy is even in good or bad shape.

"If you ask Democrats, they mostly say the economy is fantastic. If you ask Republicans, they say the economy is terrible. I think it's somewhere in between. I think that's what the data actually shows," Watson says.

The election is expected to be a rematch between incumbent Democrat Joe Biden, and his Republican predecessor Donald Trump.

"On the Trump side, they have not really announced a great deal of specific policy. So that's kind of a mystery. We know what the Biden administration has done and says they will do. People can like it or not like it, but they at least know. So what we do know from the Republican Trump side is he wants to further restrict immigration. He will probably resume the various trade war and tariff measures that he was doing last time and possibly more aggressively," Watson says.

"But again, the difficulty is people aren't operating from reality. People are operating from their own predispositions, what they think is happening. So that makes it hard to predict."

Asked whether the average American is feeling as if they're doing well at the moment, Watson says this is a really interesting question.

"The survey data that's out there is really confusing, because when they ask people, how is your situation, how are you doing financially in your own family and household? Most people, pretty solid majorities, over 60% are saying, 'I'm great, I'm in a good spot.' But then if you ask them how do you think the economy is doing overall for everyone else, they become very bearish. They think it's terrible. So it's hard to see how both of those are true at the same time," says Watson.

In the podcast Watson also talks about this week's Federal Open Market Committee (FOMC) monetary policy review and the outlook for interest rate cuts, the US inflation picture including housing's role in its stickiness, what's going on in US share markets, regional economic performance in the US, challenges in the US labour market, and the influence of the Inflation Reduction Act.