No Sign of Uptick in Consumer Views of the Economy

GALLUP NEWS SERVICE

PRINCETON, NJ -- Gallup's monthly read on Americans' attitudes about the economy shows few signs of significant variation as 2006 comes to a close. Americans' perceptions of current economic conditions as well as the direction of the economy are little changed from the past several months. Less than half of Americans rate the economy as excellent or good, and more than half say it is getting worse rather than better. Americans' views of current economic conditions are improved from the recent low point measured in early 2003, but are basically unchanged over the last three years. Meanwhile, Americans' views of the economy's direction have become more negative in each of the last two years.

Ratings of the Current Economy

Gallup's Dec. 11-14 update on Americans' views of current economic conditions in the United States shows that 42% rate the economy as excellent or good, 41% rate it as only fair, and 16% rate it as poor. These are similar to what has been measured for the second half of this year.

These ratings are also roughly in line with those from January 2006. As 2006 progressed, Americans became somewhat more negative about the economy, particularly in the late spring when gas prices rose, but economic ratings recovered and have been relatively constant over the last several months of the year.

Direction of the Economy

Slightly over half of Americans say the U.S. economy is getting worse, while about a third say it is getting better.

These views of the economy's direction are little changed since October, and are similar to those of this past January.

Perceptions of the economy's direction, like those regarding current economic conditions, became somewhat more negative in the late winter and spring, but returned to their earlier levels by the fall.

Yearly Trends

The overall Gallup current-conditions average for 2006 (based on calculating the percentage who rate the economy as excellent or good minus the percentage rating it as poor) is similar to where it was in 2004 and 2005. These last three years have been more positive than the very negative ratings measured in 2003, but they remain significantly below the ebullient attitudes on the economy measured in the last years of the 1990s, 2000, and 2001.

In short, although assessments of the U.S. economy have recovered slightly since the 2003 low point, attitudes have not recovered to their levels during the last economic boom -- and have been essentially static over the last three years.

By contrast, in the last two years, there has actually been a downward trend in Americans' optimism about the economic outlook.

As was the case for assessments of the current economy, the net future expectations measure (the percentage saying the economy is getting better minus the percentage saying it is getting worse) dropped precipitously after 2000, falling from a net +21 to a net -30 in 2001. Expectations about the direction of the economy improved in 2002 and 2003, and rose above the break-even point in 2004.

But Americans grew much more pessimistic about the direction of the economy in 2005, and have become even more negative this year. All in all, the percentage of Americans who in 2006 believed that the economy is getting worse outscored the percentage saying it is getting better by 26 points.

Discussion

The data analyzed in this report are based on consumers' perceptions of the national economy. Most consumers are, of course, not economic experts, and many have little exposure to the types of economic data economists use to assess the state of the economy. Thus, perceptions of the national economy probably reflect a number of inputs far afield from what is taken into account in more official statistics. Some of these could include personal experiences at work, discussions with others, and local and national news media accounts of the economy. Other inputs into these assessments probably reflect non-economic factors such as politics, the war in Iraq, and the overall low levels of satisfaction currently being measured elsewhere in Gallup surveys. (For example, Gallup analysis shows that at the moment, Democrats are significantly less likely to rate the national economy as positive than are Republicans, reflecting not so much differences in actual economic circumstances as Democrats' general levels of dissatisfaction with a Republican administration.) It will probably be difficult for the types of broad perceptual measures of the national economy that are discussed here to return to extremely high levels of confidence until the public's overall mood improves.

Survey Methods

These results are based on telephone interviews with a randomly selected national sample of 1,010 adults, aged 18 and older, conducted Dec. 11-14, 2006. For results based on this sample, one can say with 95% confidence that the maximum error attributable to sampling and other random effects is ±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.