• by September 23, 2003

Up or Down?

Christmas spending will be up according to the NRF, consumer confidence in the economy falls according to the Gallup Poll, but at the same time, most economic forecasters are talking about the economy having its best performance since 1999 during the last half of this year.

The recent Gallup Poll release asks why is consumer confidence declining as the economy builds positive momentum? Why aren't economic forecasters worried about consumer spending falling as consumer confidence declines? Will consumers continue to spend even if their confidence in the economy continues to tumble?

In September, 30% of consumers rate current economic conditions as "poor" while only 21% say they are "good" or "excellent."

Currently, though, more consumers are saying economic conditions are getting worse (50%) than say they are getting better (40%). This means consumers are less optimistic about future economic conditions than they were this summer.

Gallup's September survey shows that nearly half the public (46%) expects unemployment to increase over the next six months, while only a third (33%) expect it to decline, even as economists expect the economy to grow at its best rate in years. Traditional economic analysis suggests that when consumers get concerned about losing their jobs, they reduce their spending.

The most recent UBS/Gallup Index of Investor Optimism poll provides new evidence supporting the idea that significant increases in individual investor net-worth levels -- wealth gains -- have a positive impact on consumer spending intentions. For the moment, it appears as though these wealth gains are offsetting whatever negative effects unemployment fears are having on the rest of the consuming public's spending.

Evidently, concludes the report, many economists assume that productivity gains and the wealth benefits they provide can keep this process and the economy going even if the job market continues to suffer.

Find out more here.