ANN ARBOR, Mich.–(ENEWSPF)–August 31, 2012. Consumer confidence improved slightly in August due to consumers’ more favorable evaluations of their present financial situations, according to University of Michigan economist Richard Curtin, director of the Thomson Reuters/University of Michigan Surveys of Consumers. The Surveys, conducted by the U-M Institute for Social Research (ISR), have been monitoring consumer attitudes and expectations for over 60 years.
Rather than citing income changes, consumers were more likely to cite reductions in the amount of their outstanding debt, according to Curtin. These improvements, however, did not extend into the future, as their financial prospects for the year ahead remained unchanged at negative levels.
The majority of consumers anticipated no wage gains in the year ahead, and the majority expected falling inflation-adjusted incomes. Perhaps more distressing, half reported that their financial situation was now worse than it was five years ago, and half expected no improvement in the next five years.
Buying Plans: Discounts Versus Tax Uncertainty
Buying plans were bolstered by the availability of deeper price discounts as well as record low interest rates. More consumers with household incomes below $75,000 held favorable buying attitudes toward large durable goods than at any other time since August of 2007. Among higher income households, however, these buying attitudes were slightly less favorable in August and remained well below the peaks recorded in 2010 and 2011.
Slower Economic Growth Expected
Consumers thought that the pace of economic growth would slow slightly, although there was no change in their overall assessment of the economy. The majority of consumers in August thought that economic conditions would remain unfavorable until the start of 2013, and just one-third expected a continuous expansion over the next five years. Importantly, there was no change in consumers’ negative views about current economic policies.
Consumer Sentiment Index
The Sentiment Index was 74.3 in August 2012, up from 72.3 in July, and well above last August’s 55.8. The outsized year-to-year gain of 18.5 Index-points from last August reflects a rebound from the disastrous lows during the debt ceiling debate. The Expectations Index fell to 65.1 in August, only slightly below July’s 65.6, but it was the lowest since the start of 2012. In contrast, the Current Conditions Index improved to 88.7 in August, a large gain from 82.7 in July, and the highest since the start of the year.
About the Survey
The Surveys of Consumers is a rotating panel survey based on a nationally representative sample that gives each household in the coterminous U.S. an equal probability of being selected. Interviews are conducted throughout the month by telephone. The minimum monthly change required for significance at the 95% level in the Sentiment Index is 4.8 points; for Current and Expectations Indices, the minimum is 6.0 points.
Established in 1949, the University of Michigan Institute for Social Research is the world’s largest academic social science survey and research organization, and a world leader in developing and applying social science methodology, and in educating researchers and students from around the world. ISR conducts some of the most widely cited studies in the nation, including the Thomson Reuters/University of Michigan Surveys of Consumers, the American National Election Studies, the Monitoring the Future Study, the Panel Study of Income Dynamics, the Health and Retirement Study, the Columbia County Longitudinal Study and the National Survey of Black Americans. ISR researchers also collaborate with social scientists in more than 60 nations on the World Values Surveys and other projects, and the institute has established formal ties with universities in Poland, China and South Africa. ISR is also home to the Inter-University Consortium for Political and Social Research, the world’s largest digital social science data archive. For more information, visit the ISR website at www.isr.umich.edu.