Consumer Confidence: Stop Talking About the "Undecided Voter" and Start Talking About The "Disenchanted Consumer"
month's Consumer Confidence Index showed general improvements and reported that
optimists now again outnumber pessimists on income expectations. But although
the index shows relative good news, when you put the increases and strong
forecasts for October's index at 74 into perspective, this number is still
lower than the lowest point in the 2001 recession.
if the index isn't showing levels historically associated with recovery and
economic improvement, what's the story? It has nothing to do with the undecided
voter, and has everything to do with the disenchanted consumer. Consumer
disillusionment with the future of our economy was illustrated by some of the
figures in last month's release.
September, the number of individuals claiming business conditions were "good"
grew slightly from 15.3 percent to 15.5 percent, and individuals claiming
conditions were "bad" fell from 34.3 percent to 33.3 percent. Given those figures, 51.2 percent of
those surveyed felt that the economy was neither improving nor deteriorating.
September, 8.3 percent of individuals surveyed described the job market as
"plentiful," up from August's 7.2 percent. Individuals claiming that jobs were still "hard to get" fell
from 40.6 percent to 39.9 percent. On the assessment of the future of the jobs
market, again, over half of the individuals surveyed, 51.8 percent, saw the employment
situation as stagnant to weak.
This week, on October 30, 2012, the
Conference Board will release the Consumer Confidence Index for October. The
index wavered back and forth over the summer and into the fall, with declines
in August and improvements in September to 70.3. September's index represented a seven percent increase.
Notwithstanding these improvements, the index
doesn't show normal recovery levels, especially considering that the recession
technically ended over two years ago.
Today's "good days" with the Consumer Confidence Index are still at par
with or even below the index levels during
the 1990 and 2001 recessions of 71.5 and 109.3 respectively. Even the 1980
recession level was 69.8, compared to the low 70s we're seeing today.
These low levels are, in part, explained by
the extreme drop in the index during the recession to the lowest levels seen in
three decades at 54. But that doesn't explain why consumer confidence hasn't
Uncertainty due to the presidential election
around the future political agenda and president is likely contributing
somewhat to lower confidence levels. Employment levels lingering persistantly
above eight percent up until last month and tattered household balance sheets
are also contributing to uncertainty.
Ultimately, consumer disenchantment seems to
be the biggest problem, as illustrated by some of the figures in last month's
release. On the assessment of the future of the jobs market and business
conditions over half of the individuals surveyed saw sustained economic conditions.
These disillusioned consumers are shrugging
their shoulders and saying "eh" to the economy today as I see it. Over half of our consumers are in this
"eh" camp when it comes to the future of our economy. This attitude is
manifested in the low consumer confidence levels, which are certainly improving
relative to the 2008 levels, but are still remarkably pessimistic.