Middle Tennessee Consumer Confidence Index – October 2008
Middle Tennessee Consumer Confidence Index
October 3, 2008
The Office of Consumer Research
at Middle Tennessee State University
Director -- Timothy R. Graeff, Ph.D.
"Consumers Continue to View the Economy
Negatively”
Confidence among Middle Tennessee consumers has reached an all time low. The
Middle Tennessee consumer confidence index now stands at 1, compared to 30 in May.
In less than two years time the overall consumer confidence index for Middle Tennessee
has declined from 319 in February of 2007. This precipitous drop is due to consumers’
negative views of the current economy and consumers’ trepidation about making large
expenditures given the uncertainty surrounding the national economy and the potential
negative effects of the credit crunch on the ability of businesses and consumers to borrow
money. The current poll of 411 randomly selected adult residents of Davidson,
Rutherford and Williamson counties was conducted the evenings of Monday, September
29 and Thursday, October 2.
Consumers hold increasingly negative views of the current economic situation. The
current situation index fell sharply to -57, from -19 in May. 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. The
current negative score indicates that the number of consumers who hold negative views
of the economy outnumber those who hold positive views of the economy. Rising
gasoline prices, gasoline shortages, news of layoffs, concerns about the future of the job
market, concerns about further negative effects of the credit crunch and decreases in the
stock market have all contributed to consumers’ overall gloomy view of the current
American economy. Only seven percent of local consumers said that business conditions
in the country are “good.” The fact that these surveys were conducted the same week
that the US Congress was debating an economic bailout plan could have contributed to
the depressed mood of consumers toward the economy.
Consumers continue to worry about the job market. The percent saying that jobs in
Middle Tennessee are “easy to find” dropped to 10 from 15. Further, the percent saying
that jobs are “hard to find” rose to 33 from 25.
Similarly, the retail shopping outlook also looks negative. The purchasing situation
index dropped sharply to -1, from 38. This is the first time since the survey’s inception
that this component of the consumer confidence index has been negative. The percent of
local consumers saying that now is a good time to make large purchases for the home
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Middle Tennessee Consumer Confidence Index – October 2008
decreased to 17 from 25. Similarly, the percent saying that now is a good time to buy a
car decreased to 34 from 38. Such eroding perceptions are not good news for local
retailers hoping for significant gains in consumer spending heading into the fall and
Christmas shopping seasons.
One positive result from the survey was the increase in the future expectations index,
which increased rather dramatically to 59 from 11. This is the highest level that the
future expectations index has seen since November of 2007. Apparently, the negative
news regarding the current economy has not completely extinguished consumers’ hopes
for an economic turnaround within the next year. The percent of local consumers saying
that business conditions in the country will improve in the next six months rose to 40
from 25. Similarly, the percent saying that business conditions in Middle Tennessee will
improve in the next six months increased to 30 from 20. Most importantly, the percent of
consumers who expect that their personal financial situation will improve in the next 12
months rose to 39 from 33. This increase in the future expectations index mirrors the
results from the most recent national survey of consumer confidence from the Conference
Board which found an improvement in consumers’ short term outlook for the economy.
Taken together, these results indicate that consumers have taken a negative view of
the current economy, but they have not lost all hope about a possible turnaround in the
near future. Unfortunately for local retailers, when consumers begin to feel
uncomfortable about their employment situation and the outlook for the job market, and
they are forced to tighten their budgets in response to increased gasoline prices, they
become less willing to make large purchases. Recent sharp declines in the stock market
have also left consumers feeling less wealthy and extremely uncertain about their savings
and the value of their investments. If consumers indeed cut back on spending, this could
cause the economy to slow down even more leading to even further decreases in
consumer confidence.
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.
The Middle Tennessee Consumer Confidence Index and Components
Overall Cons. Conf. Index
Current Situation Index
Future Expectations Index
Purchasing Situation Index
Sept Dec
‘06 ‘06
335 242
146 102
105 58
84
82
Feb
‘07
319
132
89
98
Apr May Sept Nov
‘07 ‘07 ‘07 ‘07
278 206 242 225
120 94 105 88
83
55
79
75
75
57
58
62
1
Feb
‘08
158
49
53
56
Apr May
‘08 ‘08
44
30
-15 -19
24
11
35
38
Oct
‘08
11
-57
59
-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.
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Middle Tennessee Consumer Confidence Index – October 2008
Comparison To The Nation:
Compared to consumers across the country as a whole, local consumers have slightly
more negative perceptions of the overall American economy and the current job market.
However, local consumers are more optimistic about the future. Most noticeably, local
consumers 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
(%)
132
14
12
12
14
7
40
10
19
39
Source: September 30, 2008 Consumer Confidence Report – The Conference Board (www.conferenceboard.com). The next release from the Conference Board is scheduled for October 28, 2008.
2
3
Middle Tennessee Consumer Confidence Index – October 2008
Gas Prices and Consumer Spending:
Consumers were also asked whether or not they have reduced (or plan to reduce) their
spending due to the recent increases in gasoline prices. More than half (58%) of
consumers have reduced their travel due to the higher gasoline prices. Nearly one half of
consumers have reduced their spending for eating out (49%) and entertainment (48%).
Forty percent have reduced spending on home improvement projects, and almost one
third (32%) have reduced spending on groceries.
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Middle Tennessee Consumer Confidence Index – October 2008
Stock Market Declines and Consumer Spending:
Consumers were also asked whether or not they have reduced (or plan to reduce) their
spending due to the recent decreases in the stock market. The long term nature of the
stock market means that fluctuations in the market value of investments should not have
as dramatic of an effect on consumer spending as increases in gasoline prices. However,
approximately one third of consumers reported that they have reduced their spending on
travel (34%), eating out (32%), entertainment (32%), and home improvement projects
(30%) due to the recent decreases in the stock market. Even though investors might not
need to liquidate their investments for many years, reductions in the value of their
investments and savings can make consumers feel less wealthy in the short term.
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Middle Tennessee Consumer Confidence Index – October 2008
Changes in Consumers’ Perceptions of the Economy
The table below shows how consumers’ responses to selected survey questions have
changed from May 2008.
October
2008
(%)
Change from
May 2008
Business conditions in the U.S. are Good.
7
7%
Six months from now, business conditions in the
U.S. will be Better.
40
15%
Business conditions in Middle Tennessee are
Good.
29
5%
Six months from now, business conditions in
Middle Tennessee will be Better.
30
10%
5%
Jobs in Middle Tennessee are Easy To Find.
10
Six months from now there will be More Job
Openings in Middle Tennessee
19
I am Better Off Financially than I was one year
ago.
18
12 months from now I will be Better Off
Financially than I am today.
1%
No Change
6%
39
8%
Now is a Good Time To Make Large Purchases.
17
8%
Now is a Good Time To Buy A Home.
57
4%
Now is a Good Time To Buy A Car.
6
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Middle Tennessee Consumer Confidence Index – October 2008
About the Survey:
The results reported here are based on telephone interviews with 411 randomly
selected adult residents, 18 years and older, from Davidson, Rutherford, and Williamson
counties. Phone interviews were conducted between 4:30 pm and 8:30 pm on Monday,
September 29 and Thursday, October 2. With a sample of 411 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 ± 4.8%. 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).
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Middle Tennessee Consumer Confidence Index – October 2008
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
Sep
06
(%)
42
50
7
Dec
'06
(%)
39
53
8
Feb
07
(%)
42
48
9
Apr
07
(%)
36
54
9
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
21
62
12
20
57
21
20
60
16
20
57
21
17
56
23
18
62
19
24
51
22
23
52
20
22
47
29
25
44
29
40
37
18
71
26
2
56
36
7
63
31
4
57
37
5
58
36
3
63
30
5
55
38
6
48
45
7
33
52
14
34
51
12
29
57
13
30
63
5
26
62
11
32
56
9
35
57
7
27
60
9
33
56
9
33
52
13
28
59
12
25
53
20
20
58
20
30
50
15
28
22
28
28
21
23
26
21
14
15
10
54
11
51
20
53
11
53
13
55
17
55
17
55
15
52
18
56
24
51
25
49
33
25
53
19
36
47
12
33
53
10
26
57
11
28
56
12
30
54
14
24
52
18
20
49
27
20
50
26
19
50
25
In Middle TN six months
More
from now there will be
About same
(# of job):
Fewer
34
53
8
Better
37
35
35
39
32
34
32
29
26
18
18
About same
50
12
49
15
52
12
48
13
47
20
50
15
51
16
47
23
45
28
44
37
47
34
49
46
4
44
47
6
46
45
8
41
49
8
39
46
11
46
47
6
45
44
8
39
47
11
43
44
10
33
50
12
39
44
11
33
44
13
38
42
15
41
44
9
39
45
10
28
49
16
28
49
15
37
40
20
28
44
23
24
38
35
25
35
36
17
33
45
46
30
19
48
29
19
52
25
18
52
25
18
50
29
18
50
18
30
53
16
29
64
11
22
60
16
22
65
9
21
57
12
28
49
32
12
46
33
16
46
35
14
34
40
22
34
40
21
40
41
15
40
37
19
34
37
25
36
34
28
38
25
33
34
27
36
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
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Middle Tennessee Consumer Confidence Index – October 2008
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?
9