Consumers May Not Be in Spending Mood This Holiday Season

Consumers May Not Be in Spending Mood This Holiday Season

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GALLUP NEWS SERVICE

PRINCETON, NJ -- As we approach the prime Christmas shopping days of 2001, there is some good economic news to go along with the bad news that has dominated the media since Sept. 11. Gasoline prices and interest rates are down, and the stock market is up to pre-attack levels. Nonetheless, new Gallup economic data suggest that Americans may be less inclined to spend money this holiday season than last.

Prior to Sept. 11, consumer confidence was plunging. Following the terrorist attacks, consumer perceptions of the economy benefited from a significant "rally effect." Over the past two months, however, the economic rally effect has dissipated. The net result is that consumer perceptions of the national economy are now back to the same low level they had reached just before the attacks.

Even more importantly, it appears that employees' perceptions of the health of their companies have also declined between October and November. And, although consumers perceive their local economies to be better than the national economy, these perceptions have also declined over the past month. Finally, consumers seem most optimistic about their own personal financial situations. Still, even these perceptions seem consistent with a recession.

All of this is probably not good news for the Christmas shopping season. The implications for the breadth, depth, and length of the U.S. recession are less clear. The kind of recession we'll have depends in large part on whether consumer perceptions are going to stay at their current weak levels or get even weaker during the months ahead. This is particularly true at the local level, where employees' perceptions of their companies, and consumers' perceptions of their local economies, may be lagging behind those of the national level.

Consumers are Becoming Less Optimistic About Their Local Economies

New Gallup Poll economic data (Nov. 8-11) show 50% of consumers rating conditions in their local economy as good (44%) or excellent (6%). This is down from our Oct. 11-14 poll that showed 59% of consumers rating conditions in their local economy as good (51%) or excellent (8%).

November 2001 Gallup Poll economic data also show 42% of Americans saying economic conditions in their community are getting worse, while 40% say they are getting better. This is just about the same as in October, when 40% of Americans said economic conditions in their community were getting worse and 40% said better.

Employees are Becoming Less Optimistic About Their Companies

In November, one out of four (25%) private sector employees say they expect that the number of workers employed by their companies will go down a lot or a little over the next six months. This is up from October (Oct. 11-14), when one out of five (20%) employees said that they expected the number of workers at their companies to go down a lot or a little.

Similarly, in November, about one out of four (24%) employees say that they expect their companies' revenues to go down a lot or a little. This was virtually the same in October, when 22% of private sector employees said that they expected the revenues of the company where they work to go down a lot or a little.

Finally, only about one out of 10 (11%) employees say that they expect the price of their companies' products and services will go down a lot or a little over the next six months -- 9% expressed that view in October.

EMPLOYEES' VIEWS OF THE HEALTH OF THE COMPANIES WHERE THEY WORK

	Nov 8-11	Oct 11-14	Difference

	%	%	%
The overall amount of revenue of your company or business will go down a lot or a little	24	22	-2
The price of your company's products or services will go down a lot or a little	11	9	-2
The number of workers your company employs will go down a lot or a little	25	20	-5

Americans are Also Slightly Less Optimistic About Their Own Financial Situation

New Gallup Poll economic data (Nov. 8-11) show 54% of consumers rating their own financial situation as good (46%) or excellent (8%) - - essentially unchanged from October.

The Nov. 8-11 poll, however, shows that 45% of Americans say their financial situation as a whole is getting better, while only 33% say it is getting worse. This is less optimistic than in October, when 50% of Americans said their financial situation as a whole was getting better, while only 30% said it was getting worse.

Further, eight out of 10 (80%) consumers say that their level of spending will decrease (29%) or remain the same (51%) over the next six months. This is the same as in October, when 28% said their spending would decrease, and 50% said it would stay the same. In November, only one out of five (20%) consumers say they will increase their overall level of spending a lot (5%) or a little (15%).

More than one out of three (36%) consumers say they will decrease their debt level a lot (8%) or a little (28%) over the next six months. This is a much lower percentage than in October, when 43% of consumers said that they planned to reduce their debt levels. Only about one out of eight (14%) say they will increase their debt level.

Similarly, more than one out of three (35%) consumers say they expect to increase their monthly savings a lot (6%) or a little (29%) over the next six months. One out of seven (16%) say they expect to decrease the amount they save monthly a lot (7%) or a little (9%).

Finally, more than one out of three (35%) consumers say they expect their incomes to increase a lot (5%) or a little (30%) over the next six months. This is optimistic, given their outlook for the national economy, their local economies, and the companies where they work. Only one out of 10 (10%) consumers expect their incomes to go down a lot (3%) or a little (7%) during the next six months.

CONSUMER VIEWS OF THEIR PERSONAL FINANCIAL SITUATION

	Nov 8-11	Oct 11-14	Difference

	%	%	%
Level of income going down a lot or a little	10	9	-1
Level of monthly savings going down a lot or a little	16	16	0
Level of spending going down a lot or a little	29	28	-1
Level of debt going down a lot or a little	36	43	+7

In sum, employees seem somewhat less optimistic about the health of their companies than they did a month ago. Consumers also seem slightly less optimistic about their local economies and even their personal financial situations than they did last month. Combine this with their perceptions of a weak national economy, and it would not be surprising if many consumers spend conservatively this holiday season -- even if they have more money in their pockets than they expected.

Survey Methods

These results are based on telephone interviews with a randomly selected national sample of 1,005 adults, 18 years and older, conducted Nov. 8-11, 2001. For results based on this sample, one can say with 95 percent confidence that the maximum error attributable to sampling and other random effects is plus or minus 3 percentage points. 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.

How would you rate economic conditions in your local community today -- as excellent, good, only fair, or poor?

	Excellent	Good	Only fair	Poor	No opinion

2001 Nov 8-11	6%	44	37	13	*

2001 Oct 11-14	8%	51	32	9	*

Right now, do you think that economic conditions in your local community as a whole are getting better or getting worse?

	Getting better	Getting worse	SAME (vol.)	No opinion

2001 Nov 8-11	40%	42	17	1

2001 Oct 11-14	41%	40	17	2

How would you rate your financial situation today -- as excellent, good, only fair, or poor?

	Excellent	Good	Only fair	Poor	No opinion

2001 Nov 8-11	8%	46	34	12	*

2001 Oct 11-14	9%	46	32	13	*
2001 Sep 7-10	7%	47	36	10	*
2001 Aug 16-19	8%	44	35	12	1

Right now, do you think that your financial situation as a whole is getting better or getting worse?

	Getting better	Getting worse	SAME (vol.)	No opinion

2001 Nov 8-11	45%	33	21	1

2001 Oct 11-14	50%	30	19	1

Thinking of your own financial situation just now, how good of a position are you in to buy some of the things you would like to have -- [ROTATED: a very good position, somewhat good, neither good nor bad, somewhat bad, (or) a very bad position]?

For each of the following, please indicate whether -- over the next six months -- you think [INSERT ITEM, RANDOM ORDER] will -- [ROTATED: increase a lot, increase a little, remain the same, decrease a little, (or) decrease a lot]?

A. Your overall level of spending

	Increase a lot	Increase a little	Remain the same	Decrease a little	Decrease a lot	No opinion

2001 Nov 8-11	5%	15	51	21	8	*

2001 Oct 11-14	5%	16	50	20	8	1

B. The total amount of debt you have, that is the amount of money you owe a bank or any other lender for a mortgage, credit card, car loan, or any other personal loan or credit line

C. The total amount of money you are personally saving monthly for the future -- either in a savings account, 401K plan, or in some other type of investment

D. Your income

Now, I'd like you to think about the company you work for and what you know or have heard about how it is doing. Over the next six months, what do you think will happen to each of the following in the company that you work for? How about -- [RANDOM ORDER] -- do you think it will -- go up a lot, go up a little, remain the same, go down a little, (or) go down a lot?

BASED ON -- 498 -- ADULTS EMPLOYED BY A PRIVATE COMPANY, NON-PROFIT ORGANIZATION, OR SELF-EMPLOYED; ±5 PCT. PTS.

A. The price of your company's products or services

	Go up a lot	Go up a little	Remain same	Go down a little	Go down a lot	DOESN'T APPLY (vol.)	No opinion

2001 Nov 8-11	4%	22	57	8	3	4	2

2001 Oct 11-14	4%	25	57	7	2	3	2

B. The overall amount of revenue or business of your company

	Go up a lot	Go up a little	Remain same	Go down a little	Go down a lot	DOESN'T APPLY (vol.)	No opinion

2001 Nov 8-11	10%	32	29	19	5	3	2

2001 Oct 11-14	10%	34	31	18	4	1	2

C. The number of workers your company employs

	Go up a lot	Go up a little	Remain same	Go down a little	Go down a lot	DOESN'T APPLY (vol.)	No opinion

2001 Nov 8-11	5%	20	47	19	6	2	1

2001 Oct 11-14	5%	20	52	16	4	2	1

* -- Less than 0.5%

(vol.) -- Volunteered response

Very good position

Somewhat good

Neither good nor bad

Somewhat bad

Very bad position

No
opinion