Virginia Consumer Sentiment and Inflation Expectations Report for Dec. 2024

Consumer sentiment jumped almost three-and –a-half points to 77.6 since August, continuing the growth from the summer months. Nationally, inflation remains below 3.0%. With low unemployment and strong wage growth, Virginians likely feel more financially secure, bolstering consumer optimism. The 2024 presidential election coincided with large shifts in sentiment by party affiliation. Republicans feel considerably more optimistic, while Democrats feel less so.  

Over a quarter of respondents report that their household finances are better today than a year ago. Meanwhile, 46% believe that now is a good time to buy large, durable goods like a refrigerator, up 10 percentage points since August 2024. The Virginia Index of Current Conditions (ICC) is 71.5 in the final reading of 2024, up almost 10 points since the late summer. Strong economic news continues, including slowing price growth with a robust labor market and personal consumption levels. Wage growth continues to outpace inflation, giving workers more purchasing power. The overall economy, as measured by GDP, grew steadily over the second and third quarters of 2024, 3.0% and 2.8%, respectively. Due to an improved financial situation, Virginians plan to increase their holiday spending relative to last year. 
  
Forty-four percent of Virginians believe their household finances will improve over the coming year, compared to 22% who anticipate growing challenges; almost half of respondents think the coming few years will include strong economic growth. The Virginia Index of Consumer Expectations (ICE) was 81.5 in the fourth quarter of 2024, essentially unchanged from the last quarter (82.0). Comparatively, the national ICE was 76.9 in November. The improved optimism about the near-term future indicates that consumers are becoming more confident that inflation moderation will be sustained and that the economy will continue to prosper.  

Consumer sentiment about the economy and personal finances is heavily influenced by presidential elections. If one’s “team” wins the presidency, one feels more optimistic; pessimism increases substantially if one’s “team” does not win. Relative to August 2024, in November 2024, consumer sentiment for Virginians who affiliate with the Republican Party rose by 38 points, while those who affiliate with the Democrat Party fell by 24 points. This shift in sentiment by party affiliation also occurred after the 2016 and 2020 elections.  

Analysis 

"Consumer sentiment continued to improve nicely in the second half of 2024,” said Dr. Alice Louise Kassens, John S. Shannon Professor of Economics and senior analyst at the Roanoke College Institute for Policy and Opinion Research. “Consumers continue to spend, which is crucial to economic growth. Our spending makes up close to 70% of all spending in the economy, so strong household spending is paramount for a strong economy. Local businesses should see a strong holiday spending season, helping them make their 2024 sales goals. The continued increase in optimism is likely due to improvements in personal finances. Inflation growth continues to moderate and is lower than wage growth, giving consumers improved purchasing power. Consumers may not like the prices they see, but they can increasingly afford what they need and want. The Misery Index, the sum of the unemployment and inflation rates, is near pre-pandemic levels. Initially, it grew due to high unemployment; the index experienced a second spike as price growth accelerated in 2022. The pain has eased for over a year through falling inflation and a continued robust labor market, boosting consumer sentiment. Despite the strong economy, Democrats grew significantly more pessimistic in November. It is typical that after a presidential election, individuals who did not see their candidate win the presidency grow significantly more pessimistic. Overall consumer sentiment is up in the commonwealth, indicating that the added optimism of Republicans and the overall strength of the economy more than balance the added pessimism of Democrats.”   
  

A copy of the questions and all toplines may be found here.  
 
More information about the Roanoke College Poll may be obtained by contacting Dr. Alice Kassens at kassens@roanoke.edu or 540-375-2428 or the Roanoke College Marketing and Communications Office at 540-375-2282 or rcnews@roanoke.edu. roanoke.edu/IPOR