Middle Tennessee Consumer Confidence Index – May 2009
Middle Tennessee Consumer Confidence Index
May 28, 2009
The Office of Consumer Research
at Middle Tennessee State University
Director -- Timothy R. Graeff, Ph.D.
"Consumer Confidence Continues to
Improve”
Confidence among Middle Tennessee consumers edged slightly higher in May,
continuing its rebound that began earlier this year. The overall confidence index rose to
113 from 105 in April. This modest gain resulted from slight improvements in
consumers’ perceptions of the current economy, their expectations for the future
economy, and their perceptions that now is a good time to make large purchases. The
current poll of 200 randomly selected adult residents of Davidson, Rutherford and
Williamson counties was conducted the evening of Tuesday, May 26.
The Middle Tennessee Consumer Confidence Index and Components
Overall Cons. Conf. Index
Current Situation Index
Future Expectations Index
Purchasing Situation Index
May Sept Nov
‘07 ‘07 ‘07
206 242 225
94 105 88
55
79
75
57
58
62
Feb
‘08
158
49
53
56
Apr May Oct Dec Feb Apr
‘08 ‘08 ‘08 ‘08 ‘09 ‘09
44
30
1
4
-66 105
-15 -19 -57 -109 -160 -121
24
11 59
56
21
109
35
38
-1
57
73
117
May
‘09
1131
-118
110
121
The consumer confidence index scores are based on consumers’ responses to eleven
questions measuring their perceptions of the current economy, the future economy, jobs,
personal finances, and whether or not now is a good time to make large purchases. Four
questions make up the current situation index, four questions make up the future
expectations index, and three questions make up the purchasing situation index. The
overall confidence index is based on all eleven questions combined.
The 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 of the economy is equal to the percentage of consumers who hold positive
views of the economy. A positive score indicates that the number of consumers who hold
positive views of the economy outnumber those who hold negative views of the
economy.
1
The score is computed by adding the percentage of favorable responses to each question and subtracting
the percentage of negative responses to each question.
1
Middle Tennessee Consumer Confidence Index – May 2009
Current Situation Index
The current situation index is still negative, indicating that consumers recognize that
the current economy is still in bad shape. However, the slight increase in the current
situation index to -118 from -121 in April was due primarily to a shift from negative
perceptions to more moderate perceptions, rather than an increase in the number of
consumers holding positive views of the current economy.
In fact, the percent of local consumers who said that business conditions in the country
as a whole are “good” decreased slightly to 4 from 5 in April. This was offset by a
decrease in the percent who said that business conditions are “bad” from 41 to 39. Views
of the local economy followed a similar pattern. The percent who said that business
conditions in Middle Tennessee are “good” dropped to 14 from 17, with the percent who
said that local business conditions are “bad” decreasing from 22 to 20.
Employment and the Job Market
Most local consumers still have concerns about the job market and many are fearful
about future contractions in the job market. The percent saying that jobs in Middle
Tennessee are “easy to find” rose only minimally to 3 from 2. More than half of local
consumers (54 percent) still say that jobs in Middle Tennessee are “hard to find.” The
percent saying that in the next six months there will be “more job openings” actually fell
to 29 from 31. The percent saying that in the next six months there will be “fewer job
openings” rose to 17 from 15.
Personal Finances
Personal finances have a direct effect on consumers’ purchase decisions.
Unfortunately, local consumers’ perceptions regarding their personal finances have not
improved since April. The percent saying that compared to a year ago they are “better
off financially” stayed steady at 12. Similarly, the percent saying that in the next 12
months they will be “better off financially” also remained unchanged at 38.
Purchasing Situation Index
The purchasing situation index rose modestly to 121 from 117 in April, indicating a
shift from negative views to those that are more moderate. The percent of consumers
who believe that now is a good time to make large purchases for the home increased to
41 from 39. The percent who said that now is a good time to buy a home dipped to 75
from 77. This was offset by a slight drop in the percent who said that now is a bad time
to buy a home from 10 to 8. Similarly, the percent who said that now is a good time to
buy a car dropped to 53 from 57, offset by a decrease in the percent who said that now is
a bad time to buy a car from 19 to 17.
2
Middle Tennessee Consumer Confidence Index – May 2009
The Bottom Line: What Can Retailers Expect?
A key question for local retailers is whether or not this pattern of increased confidence
over the last few months will translate into increased spending by consumers.
Unfortunately, negative views of the current economy, fears about the current job market
and future contractions in the job market, and concerns about personal finances suggest
that many local consumers are still keeping a tight grip on their wallets. Retailers might
have to wait a number of months before increases in consumer confidence will lead to
dramatic increases in consumer spending. When asked about their spending plans for this
year, 14 percent of consumers expect to increase their overall level of consumer spending
from last year. This is down from 16 percent in April. Additionally, the percent of
consumers who expect to decrease their level of spending from last year rose to 50
percent from 44 percent in April.
Unfortunately, we are not out of the woods just yet. Local retailers and businesses
should not be overly exuberant about recent increases in consumer confidence. There
could still be some tough times ahead. Even though some consumers who have managed
to weather the storm will increase their spending, many consumers are still concerned
about the economy, the job market, and their personal financial situation. These
consumers are instead taking a cautious approach and opting to save in the event of even
more economic tough times ahead. As such, the recent increases in consumer confidence
over the past few months do not necessarily mean that we will see sharp increases in
consumer spending in the immediate future.
Even though increases in consumer confidence might not lead to immediate gains in
consumer spending, continued increases in confidence, coupled with positive signs in the
future job market, will lead consumers to feel better about spending. And, such future
spending will help to grow the economy as retailers and manufacturers begin to fill jobs
to meet increased consumer demand.
The Psychology of Consumers
The psychology of consumers can have dramatic effects on the future of the economy.
Consumer spending makes up two-thirds of the American economy. Decreases in
consumer confidence that translate into reduced purchasing patterns can have significant
negative effects on the economy. Conversely, increases in consumer confidence that
translate into accelerated consumer spending can have significant positive effects on the
economy.
3
Middle Tennessee Consumer Confidence Index – May 2009
Comparison To The Nation
Compared to consumers across the country as a whole, local consumers have
traditionally held more positive perceptions of the economy. However, we now see that
compared to the rest of the country local consumers have more negative views of the
current national economy and the current job market. Nevertheless, local consumers still
are more optimistic about the future of the overall American economy, are more
optimistic about the future of the job market, and are more optimistic about their personal
financial situation in the next year. The table below illustrates some of these differences
in consumers’ responses to selected survey questions.
Business conditions in the U.S. are good.
Six months from now, business conditions in the U.S. will be better.
Jobs are easy to find (plentiful).
Six months from now, there will be more job openings.
In 12 months my personal financial situation (income) will be better.
Nation
(%)
MT
(%)
92
23
6
20
10
4
47
3
29
38
Source: May 26, 2009 Consumer Confidence Report – The Conference Board (www.conferenceboard.com). The next release from the Conference Board is scheduled for June 30, 2009.
2
4
Middle Tennessee Consumer Confidence Index – May 2009
Changes in Consumers’ Perceptions of the Economy
The table below shows how consumers’ responses to selected survey questions have
changed since April 2009.
May
2009
(%)
Change from
April
2009
Business conditions in the U.S. are Good.
4
Six months from now, business conditions in the U.S. will
be Better.
47
Business conditions in Middle Tennessee are Good.
14
3%
Six months from now, business conditions in Middle
Tennessee will be Better.
49
9%
Jobs in Middle Tennessee are Easy To Find.
3
Six months from now there will be More Job Openings in
Middle Tennessee
29
2%
I am Better Off Financially than I was one year ago.
12
No Change
12 months from now I will be Better Off Financially than
I am today.
38
No Change
Now is a Good Time To Make Large Purchases.
41
1%
No Change
1%
2%
2%
Now is a Good Time To Buy A Home.
75
4%
Now is a Good Time To Buy A Car.
5
53
Middle Tennessee Consumer Confidence Index – May 2009
About the Survey
The results reported here are based on telephone interviews with 200 randomly
selected adult residents, 18 years and older, from Davidson, Rutherford, and Williamson
counties. Phone interviews were conducted between 4:00 pm and 7:00 pm on Tuesday,
May 26. With a sample of 200 people, we can say with 95% confidence that the amount
of survey error due to taking a random sample instead of surveying all members of the
population is ± 6.9%. Other factors such as problems with question wording and
question interpretation can also introduce additional bias or error into the results. Results
from the Middle Tennessee consumer confidence surveys can be compared to national
consumer confidence surveys published monthly by the Conference Board
(www.conference-board.org). This report is also available on the Office of Consumer
Research web page (www.mtsu.edu/~consumer).
The Consumer Confidence Index is based on all 11 survey questions outlined below.
The score is computed by adding the percentage of positive responses to each question,
and subtracting the percentage of negative responses. The Present Situation Index is
based on questions 1, 3, 5, and 7 (see the following tables of results). The Future
Expectations Index is based on questions 2, 4, 6, and 8. The Purchasing Index is based
on questions 9, 10, and 11.
About the Office of Consumer Research at MTSU
In 2000, the Management and Marketing Department at Middle Tennessee State
University received funding from an MTSU Technology Access Fee grant to create a
telephone survey research lab and the Office of Consumer Research to be housed in the
department. The Office of Consumer Research uses the telephone survey lab to conduct
surveys of consumer confidence in Middle Tennessee. The surveys measure consumers’
perceptions of economic conditions in the country as a whole as well as in Middle
Tennessee. Similar consumer confidence surveys conducted by the Conference Board
and the Survey Research Center at the University of Michigan have been shown to be
very predictive of key economic indicators such as inflation, interest rates and consumer
spending.
Students in Professor Timothy R. Graeff’s marketing research courses conduct the
telephone surveys. For further information contact Timothy R. Graeff, Professor of
Marketing and Director, Office of Consumer Research (898-5124; tgraeff@mtsu.edu).
6
Middle Tennessee Consumer Confidence Index – May 2009
Consumer
Confidence
Recent Results:
Are business conditions
Good
in the U.S.
In Between
Bad
Six months from now,
Better
will business conditions
About same
in the U.S. be:
Worse
Are business conditions
Good
in Middle TN:
In Between
Bad
Six months from now,
Better
will business conditions
About same
in Middle TN be:
Worse
Are jobs in Middle TN:
Easy to find
Found
w/effort
Hard to find
May
07
(%)
33
54
10
Sept
07
(%)
32
57
10
Nov
07
(%)
25
60
13
Feb
08
(%)
18
62
19
Apr
08
(%)
11
55
33
May
08
(%)
14
59
26
Oct
08
(%)
7
52
41
Dec
08
%
5
47
48
Feb
09
%
2
42
55
Apr
09
(%)
5
54
41
May
09
(%)
4
57
39
17
56
23
18
62
19
24
51
22
23
52
20
22
47
29
25
44
29
40
37
18
38
41
19
30
43
24
47
38
13
47
36
16
58
36
3
63
30
5
55
38
6
48
45
7
33
52
14
34
51
12
29
57
13
18
61
21
11
57
31
17
61
22
14
64
20
27
60
9
33
56
9
33
52
13
28
59
12
25
53
20
20
58
20
30
50
15
32
49
17
28
48
21
40
50
10
49
39
12
21
23
26
21
14
15
10
4
2
2
3
55
17
55
17
55
15
52
18
56
24
51
25
49
33
47
43
34
58
39
54
39
54
28
56
12
30
54
14
24
52
18
20
49
27
20
50
26
19
50
25
21
50
25
19
47
31
31
52
15
29
50
17
In Middle TN six months
More
from now there will be
About same
(# of job):
Fewer
26
57
11
Better
32
34
32
29
26
18
18
13
10
12
12
About same
47
20
50
15
51
16
47
23
45
28
44
37
47
34
48
37
49
41
47
40
50
38
39
46
11
46
47
6
45
44
8
39
47
11
43
44
10
33
50
12
39
44
11
37
51
11
31
56
11
38
52
9
38
54
8
28
49
16
28
49
15
37
40
20
28
44
23
24
38
35
25
35
36
17
33
45
34
30
34
35
28
34
39
32
27
41
35
23
50
29
18
50
18
30
53
16
29
64
11
22
60
16
22
65
9
21
57
12
28
63
15
21
66
14
17
77
13
10
75
17
8
34
40
21
40
41
15
40
37
19
34
37
25
36
34
28
38
25
33
34
27
36
44
26
29
50
22
27
57
23
19
53
27
17
Compared to a year
ago,
is your personal
financial
situation:
Worse
In 12 months will your
Better
personal financial
About same
situation be:
Worse
Is now a good time to
Good time
buy large items for
In between
the home?
Bad time
Is now a good time to
Good time
buy a house?
In between
Bad time
Is now a good time to
Good time
buy a car?
In between
Bad time
7
Middle Tennessee Consumer Confidence Index – May 2009
The Middle Tennessee Consumer Confidence Survey:
1. Turning first to business conditions in the country as a whole, would you say that
business conditions in the country as a whole are good, bad, or somewhere in
between?
2. And how about 6 months from now, do you expect that in the country as a whole
business conditions will be better than they are today, worse than they are today,
or just about the same?
3. Now turning to business conditions in Middle Tennessee, would you say that
business conditions in Middle Tennessee are good, bad, or somewhere in
between?
4. And how about 6 months from now, do you expect that in Middle Tennessee
business conditions will be better than they are today, worse than they are today,
or just about the same?
5. Now turning to the availability of jobs in Middle Tennessee, would you say that
jobs are easy to find, can be found with effort, or hard to find?
6. How about in the next 6 months, do you expect that in Middle Tennessee there
will be more job openings than there are now, fewer job openings than there are
now, or about the same number of job openings?
7. We are interested in how people are getting along financially these days. Would
you say that you, and any family members living with you, are better off
financially than you were a year ago, worse off financially than you were a year
ago, or about the same?
8. Now looking ahead, do you think that 12 months from now you, and any family
members living with you, will be better off financially, worse off financially, or
about the same?
9. About the big things people buy for their homes -- such as furniture, a
refrigerator, stove, television, and things like that, generally speaking, do you
think now is a good time for people to buy major household items, a bad time, or
somewhere in between?
10. How about buying a house? Is now a good time to buy a house, a bad time to buy
a house, or somewhere in between?
11. How about buying a car? Is now a good time to buy a car, a bad time to buy a
car, or somewhere in between?
8