How About That Economy? February 19, 2008

The report released by BIGResearch and MediaPost today reports what many have known for a while: consumer confidence in the economy is slipping, slipping, slipping, and it’s manifesting itself everywhere.

BIGResearch’s Consumer Intentions & Actions Survey involved 8,000 adults whose responses, the company said, “provided unique insights & identified opportunities in a fragmented and transitory marketplace:”

Every pundit is throwing around that word recession, and it appears that consumers unfortunately agree…only one in four (26.2%) are confident/very confident in chances for a strong economy in February, a five year low. What difference a year – and a sinking housing market, credit collapse, and record prices at the pump - makes…back in February 2007, twice as many consumers (53.2%) held high hopes for the future of our economy…

Consumers envision a rocky road ahead for the employment outlook…the majority (50.4%) contend there will be “more” layoffs in the next six months, up from 41.5% in January and the highest reading since March ’03 (50.4%)…

With pump prices rising from $2.227/gal one year ago to today’s average $2.972/gal (source: AAA)…driver’s budgets are increasingly strained by additional fuel expenditures. While two in five (40.5%) are attempting to cope by simply driving less, more than a third say pump pressures have led them to reduce dining out (35.3%) and decrease vacation/travel (33.6%). Additionally, 29.8% are spending less on clothing while 22.4% are delaying a major purchase, such as a car or furniture…

[D]rivers are easing up on their pricing predictions come St. Patrick’s Day…while half (49.9%) contend that pump prices will rise through March 17 (compared to the 69.8% who predicted “more” at Valentine’s Day), 44.2% assert they’ll remain the same, while 5.8% call for a decline. Consumers are predicting an average pump price of $3.11/gal at St. Patty’s, $0.16 lower than the $3.27 forecasted for Valentine’s Day.

At the end of January, the Conference Board’s Consumer Confidence Index, based on a representative sample of 5,000, declined to 87.9 (1985=100), with the Board’s Research Center head, Lynne Franco, saying:

“Looking ahead, consumers are quite downbeat about the short-term future and a greater proportion expect business conditions and employment to deteriorate further in the months ahead. In addition, the percentage of consumers anticipating an improvement in their earnings has declined and could potentially impact spending decisions.”

On Friday Reuters/University of Michigan’s revealed that their Consumer Confidence index declined from 78.4 to 69.6 in a month, hitting a 15-year low. “Industry activity in New York state had dropped for the fourth consecutive month [in January] to its lowest level since 2003,” the Financial Times notes of the Empire State Manufacturing Index’s results.

It’s not a done deal, though — the US can still avoid recession, says the UK’s Investors’ Chronicle: industrial production overall rose 0.1% and retail revenues rose 0.3% in January (but, as they note, “some of this rise reflects higher prices rather than real growth”), but the truth of the matter is, at the end of the day, this is subjectively irrelevant for many Americans. Knowing that the economy “isn’t in a recession” doesn’t make one feel the resounding “yes” to the internal question, “Food is on the table now, will it be on the table next month?”

Bush’s economic stimulus, for many people, is too little too late. The rebate checks in the mail will simply be deposited into bank accounts, comprising one more credit card payment, a mortgage payment, maybe a down payment on something to create more debt. The knowledge of this doesn’t make confidence in one’s medium-to-long term financial future come back. People simply aren’t as confident in the economy anymore, even on the most micro- of levels, with the number of people afraid to be laid off rising.

Someone has to give America its hope and security back — the type of security that can’t be procured with any amount of guns or defense spending.