PRINCETON, NJ -- Even as back-to-school started in earnest last week, with numerous states holding their tax-free shopping events, and as consumer confidence hit a new weekly high, Gallup's Consumer Spending measure suggests a tepid consumer response. While this meets general market expectations, it is bad news for the nation's retailers, for whom back-to-school is second in importance only to the Christmas holidays.
What Happened (Week Ending Aug. 9)
Consumer Confidence hit a new weekly high of 40% -- the highest percentage saying the economy is "getting better" since Gallup daily tracking began in January 2008. This is up from 38% the prior week and 31% a month ago, and is nearly three times the level of a year ago. While consumers' expectations continue to increase, Americans' views of the current economy are essentially unchanged from the prior week (12% rate it "excellent" or "good" and 46% "poor").
Job Creation increased for the second week in a row, to 25% -- up from 24% but unchanged from a month ago. This matches the 25% job loss reported during the week, which in turn is slightly better than the 26% job loss of a month ago. Job creation is down from 35% and job loss is up from 17% during the same week a year ago.
Consumer Spending returned to the level of three weeks ago, as self-reported average daily spending in stores, restaurants, gas stations, and online increased $13 per day, recouping the $12 drop of the prior week. The previous week's decline may have occurred in anticipation of back-to-school sales, while the improvement to $66 was essentially equal to the $65 of the week ending July 26 and of a month ago. Even with back-to-school sales efforts underway, consumer spending remains down 33% from the same week a year ago.
What to Watch For
The Reuters/University of Michigan preliminary consumer sentiment report on Friday will provide an update on consumer confidence for August. Gallup's Consumer Confidence measure already finds consumer expectations improving steadily over the past several weeks. Although the preliminary sentiment measurement reported Friday will be based on a small sample in comparison to Gallup's daily measurement process, it should also show a substantial increase in consumer confidence.
While the markets may respond to the consumer confidence measure based on the idea that it reflects future consumer spending, Gallup's Consumer Spending data suggest that this link has been broken or, at least, is currently inoperative. Even as consumer confidence has surged to new 19-month highs, consumer spending has failed to follow suit. In this regard, Gallup's spending data tend to be most reflective of chain-store sales, and recent reports show these have been down considerably from a year ago. On Thursday, the Commerce Department will report July retail sales, which are expected to see a boost from the "Cash for Clunkers" program. However, consistent with Gallup's measurement, non-auto retail sales are expected to be at their weakest level in three months.
On Thursday, the government will also report jobless claims for the week ending Aug. 9. Gallup's job creation measure improved slightly last week, while its job loss measure was flat. Although jobless claims reports continue to be volatile and hard to estimate this summer given the auto bailout, Gallup's data suggest there will be a slight improvement in the jobless claims the government reports this week.
Last week's jobs report and the sales success of the "Cash for Clunkers" program have combined with the continued Wall Street rally to boost consumer optimism. However, the fact remains that increased consumer confidence does not seem to be having a significant impact on consumer spending, at least to this point. If this trend continues, Back-to-School may become a major sales bust and the fallout for the nation's retailers may be severe.
For Gallup Poll Daily tracking, Gallup interviews approximately 1,000 national adults, aged 18 and older, each day. The Gallup consumer perceptions of the economy and consumer spending results are based on random half-samples of approximately 500 national adults, aged 18 and older, each day. The Gallup job creation and job loss results are based on a random half sample of approximately 250 current full- and part-time employees each day. For the total samples of these surveys, one can say with 95% confidence that the maximum margin of sampling error is ±3 percentage points.
Interviews are conducted with respondents on land-line telephones (for respondents with a land-line telephone) and cellular phones (for respondents who are cell-phone only).
In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.