Eighty-seven percent of Americans say economy is "getting worse"
PRINCETON, NJ -- During the first two weeks of July, new Gallup polling shows 87% of Americans saying economic conditions are "getting worse" -- the same as the 87% of June, and not much different from the 86% of May and the 85% of April.
Consumer Expectations Highly Negative but Stable
Over the weekend, the Federal Reserve and the Treasury developed a plan to support Fannie Mae and Freddie Mac -- the two quasi-federal agencies that account for about 70% of the mortgage market. This is the second major public policy milestone in the current financial crisis, following the Bear Stearns bailout that took place in mid-March.
Despite this unfolding of another stage in the credit crisis, consumer expectations have remained stable, although highly negative, over the second quarter and the first two weeks of July. Significantly, this has been the case for Americans regardless of their income group during recent weeks.
Consumer Ratings of the Economy Negative but Stable
The percentage of consumers giving the economy a "poor" rating averaged 47% in June, ticked up to 50% in the first week of July, and fell back to 48% in the second week of July. The percentage of lower-income Americans (those making less than $24,000 a year) rating current economic conditions as "poor" increased from 56% in June to 60% in the first week of July and 59% in the second week of the month. "Poor" ratings among upper-income Americans (those making at least $90,000 a year) increased from 38% in June to 45% in the first week of July, before going back to 38% in the second week. Among those making $60,000 to less than $90,000, the percentage went from 39% to 46% and then to 45% during the same time, while among those making $24,000 to less than $60,000, the "poor" ratings remained basically unchanged, going from 49% in June to 50% in the first week and 49% in the second week of July.
On Tuesday, Fed Chairman Ben Bernanke, Treasury Secretary Hank Paulson, and Securities and Exchange Commission Chairman Christopher Cox testified before the Senate Banking Committee on the U.S. economy and conditions in the mortgage and financial markets. Essentially, their mission was to reassure the Congress and the public that the financial system in general and the nation's banking system in particular remains safe and sound. Additionally, President Bush held a press conference during which he answered the majority of questions dealing with the economy and the related issue of gas prices. Presumably his intent was to reassure the public as well. How effective these efforts will be remains to be seen.
During the last few months, consumer ratings of the current economy have been extremely negative, but given that they are not much different than they've been for several months, they don't seem to signal a deepening crisis in consumer confidence. Of course, consumers may not have had enough time to absorb the degree to which the credit crisis has worsened in recent weeks. Further, one could argue that current perceptions of the economy's future course can't get much worse than the 85% to 90% "getting worse" range they have been exhibiting. On the other hand, roughly 60% of lower-income consumers already rate the current economy as "poor," so the current 48% to 50% "poor" rating for consumers overall can clearly increase. Gallup sums these two ratings of current conditions and future expectations in its daily monitoring of Americans' current views of the economy.
However, it seems that many of the nation's key economic leaders may not be fully aware of just how fragile current consumer confidence is at this point. Gallup's polling suggests that consumers are now as concerned about the economy as they have been at any time since the early 1990s. The way the failure of the Southern California bank IndyMac was handled -- particularly the lines at the door and the partial repayment of deposits in excess of $100,000 -- may not provide much reassurance given current consumer concerns. Full depositor trust in federal deposit insurance is essential right now, and allowing long lines of depositors to form for hours outside a failed institution -- not to mention forcing depositors having more than $100,000 in a bank account to take a loss -- could create depository institution chaos.
Gallup's recent polling of Americans' confidence in institutions showed a sharp drop in consumer confidence in banking. Whether the current financial crisis will shake consumers' confidence in banking institutions to an even greater degree or take overall consumer confidence in the economy down to historic lows over the coming days and weeks is not clear. However, it is something that deserves careful monitoring, and Gallup will continue to do so with its daily monitoring of consumer economic perceptions.
Gallup is interviewing no fewer than 1,000 U.S. adults nationwide each day during 2008. The economic questions analyzed in this report are asked of a random half-sample of respondents each day. The results reported here are based on combined data of more than 8,000 interviews in January, February, March, April, May, and June. For results based on this sample, the maximum margin of sampling error is ±1 percentage point.
The questions for the first and second week of July are based on combined data of more than 3,000 interviews conducted June 30-July 6 and July 7-13, 2008. For results based on this sample, the maximum margin of sampling error is ±2 percentage point.
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.
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