Consumer Mood Declines Toward December Level

by Dennis Jacobe, Chief Economist

Gap in ratings between upper- and lower-income Americans closing

PRINCETON, NJ -- Consumer ratings of the economy (the percentage rating the economy "excellent" or "good" minus the percentage rating it "poor") worsened to -49 points during the week ending Jan. 11, 2009, down from -43 points the week before -- but still not as bad as December's average of -51.


Both Upper- and Lower-Income Consumer Ratings Deteriorated

Consumers' assessments of economic conditions deteriorated last week after improving modestly as December came to a close. Lower-income Americans (those with monthly household incomes of less than $2,000) continue to rate current economic conditions worse than do their upper-income counterparts (those with monthly incomes of $7,500 or more). Both groups rated the current economy worse during the week of Jan. 5-11 than they did the prior week. However, the gap between the groups -- which was 33 points last August -- continued to close and is only 7 points in the most recent week, as upper-income households' ratings of the economy are now worse than they were in December, while the ratings of lower-income Americans have not yet fallen back to last month's levels.



It really is not surprising that consumers' mood deteriorated over the past week. The holidays ended, gas prices ticked up, and the unemployment rate hit 7.2%. On top of these signs of an overall economic deterioration, upper-income Americans saw their stocks tumble once again while housing prices continued to decline. Even President-elect Obama confirmed that the U.S. economy is in a downward spiral.

The mood of consumers over the next few weeks seems hard to predict. The Obama inauguration is likely to create something of a national euphoria as Americans celebrate this historic event. On the other hand, the real economy continues to decline as it sheds more than 100,000 jobs a week and as businesses continue to close. Worst of all, it appears that the nation's banks are experiencing another wave of crisis, suggesting the financial tsunami of the past year has not yet actually begun to recede.

Earlier this week, Obama threatened to veto any effort to deny the additional $350 billion of Troubled Asset Relief Program (TARP) money. The availability of this money makes sense given continuing banking sector losses, and Americans seem to be willing to acquiesce as long as details of its usage are made clear.

However, passage of a major new fiscal stimulus plan is likely to create an intense post-inauguration debate and a lot of negative comments on the economy from the new Obama economic team. Hopefully, everyone involved will keep in mind the behavioral economics idea of "framing." Lack of consumer, investor, and business confidence in the last administration's economic leadership is a big reason the economy is in its current downward spiral. This confidence must be rebuilt if the economic situation is going to stabilize anytime soon.

Gallup.Com reports on its hiring measure every Tuesday and its consumer confidence measure every Thursday. Both measures are updated daily on Gallup.Com.

Survey Methods

Gallup is interviewing no fewer than 1,000 U.S. adults nationwide each day during 2008 and 2009. 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 August, September, October, November, and December 2008. For results based on this sample, the maximum margin of sampling error is ±1 percentage point.

The questions for the most recent two weeks of Dec 29, 2008-Jan 4, 2009, and Jan 5-11, 2009, are based on combined data of more than 3,000 interviews conducted weekly. For results based on these samples, the maximum margin of sampling error is ±2 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.

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