Consumers Losing Confidence In Economy

Comment   Email   Print
Related Articles
Local consumers have felt pessimistic about the economy for three years straight, and a new report shows that confidence is sagging more than ever.

“Any hopes for improvement in consumer confidence during the summer months can be forgotten,” Tim Graefff, director of MTSU’s Office of Consumer Research, reported in the Middle Tennessee Consumer Confidence Index released last week.

The overall consumer confidence index now stands at 27, down sharply from 63 in May 2011. This time last year, the overall confidence index stood at 76, which was down from 142 in September 2009.

This stands in stark contrast to the first half of the last decade when the overall consumer confidence index was routinely above 300, according to the report.

Scores are based on consumers’ responses to 11 questions measuring their perceptions of the current economy, the future economy, jobs, personal finances and whether now is a good time to make large purchases.

Scores for each index are computed by adding the percentage of favorable responses to each question and subtracting the percentage of negative responses to each question. A score of zero would indicate that the percentage of consumers who hold negative views is equal to those who hold positive views.

The current score of 27 is very close to zero, which means the number of positive and negative responses is nearly the same, Graeff explained in an interview.

“The number itself doesn’t tell you a whole lot; what you’re looking at is the trend, and it’s becoming more negative,” he said. “You can always say, ‘It’s good it’s not any lower,’ but it is still quite depressed feelings that people have. Historically, we’re very, very low.”

National consumer confidence also plummeted in August, according to the Conference Board Consumer Confidence Index. It had previously improved slightly in July, but fell from 59.2 to 44.5 last month.

When consumers feel negatively about the economy, a perpetual cycle is created that further worsens the economy.

Consumer spending makes up two-thirds of the American economy. Waning confidence and decreased spending can have significant negative effects on the economy, the report continues. Conversely, increases in consumer confidence translate into accelerated spending can have equally significant, but positive effects on the economy.

“When consumers begin to feel comfortable about the future of the economy and their own personal financial situation, they will increase their spending,” Graeff reports. “Such spending would then help to grow the economy as manufacturers begin to produce more, and retailers begin to fill jobs to meet increased consumer demand.”

Currently, however, consumers are not feeling positive about the economy and, subsequently, are not spending.

Continued pessimism regarding the job market, fears of potential price increases, concerns about higher taxes, worries about an ever-growing government debt and uncertainty about the negative effects of the recent S&P downgrade on the nation’s credit worthiness are all working to stifle consumers’ hopes for a quick turnaround in the economy.

Tennessee’s unemployment rate for August was released last week, weighing in at 9.7 percent. This means that nearly one in 10 Tennesseans is unemployed, which continues to concern local consumers.

While the percentage of those who said jobs are “hard to find” declined from 57 to 51, the percent who said jobs are “easy to find” remained very low at 4 percent. This percentage has remained in the single digits since December 2008, the report continues.

Additionally, consumers are also concerned about long-term prospects in the job market. Less consumers feel there will be more jobs six months from now, and more consumers feel there will be less jobs.

“Perceptions of the job market play a significant role in shaping consumers’ views of the economy and their willingness to spend money,” Graeff reports. “Insecurity due to concerns about jobs can have a deadening effect on consumers’ willingness to spend money.”

The opposite is also true: rising hopes about the potential for an expanding job market can give consumers renewed confidence when making purchasing and budgeting decisions.

Although the Middle Tennessee Consumer Confidence Index shows a growing amount of uncertainty, it offered one positive note: an increase in the purchasing situation index.

This number grew from 44 to 54, indicating that some consumers may still want to spend money amid these economic slow times.

The report showed an increase in percentages of consumers who said that now is a “good time” to make large purchases for the home, to buy a house or to buy a car. Numbers in each category rose slightly.

“Clearly, low interest and mortgage rates, and attractive 0 percent financing offers for new car purchases have not gone unnoticed,” Graeff reports. “However, the number of consumers who are able to take advantage of these purchasing incentives remains to be seen.”

Consumers also expressed more positive confidence levels in the local economy versus the national economy.

“Even though the perceptions of both the national and local economy have decreased, they still remain more optimistic about the local economy than the national economy,” Graeff said in an interview.

He added that this has consistently been the view for the past 11 years or since the survey began. Middle Tennessee is very well positioned in that it does not rely on a single industry to drive its economy.
Read more from:
CANNON COMMUNITY
Tags: 
None
Share: 
Comment   Email   Print
Powered by Bondware
News Publishing Software

The browser you are using is outdated!

You may not be getting all you can out of your browsing experience
and may be open to security risks!

Consider upgrading to the latest version of your browser or choose on below: