Confidence in the Economy

by Dennis Jacobe

Rally effect extends to the stock market and consumer rating of economy, but impact may be short-lived

GALLUP NEWS SERVICE

PRINCETON, NJ --

Key Point Summary

  • Americans are showing no panic so far about the stock market.
  • Consumer opinions about the economy got a boost from the "rally effect."
  • Consumers are less confident that they will be financially better off a year from now.
  • Consumers say that the September 11 attacks make them less confident in the economy.

Details

As the U.S. financial markets open on Monday after being closed for the longest time since World War I, investors around the world should take solace in the fact that the largest "rally effect" ever recorded by The Gallup Poll extends to the stock market and the consumer.

The American people rallied to President Bush in Gallup's poll of September 14-15, and also were significantly more likely to say they are satisfied with the way things are going in the United States than they were just before September 11. In addition, Americans are showing no panic with respect to the stock market, with some Americans even saying that the events of the past week make them more likely to invest in the U.S. stock market. American consumer opinions about the economy also got a boost from the "rally effect," although it remains at relatively weak levels.

On the other hand, consumers seem less confident about how things will be a year from now, and when asked directly about the impact of the attacks on their confidence in the economy, about a third say it has been negative. All in all, it remains to be seen whether these findings mean that the impact of the economic "rally effect" will be relatively short-lived.

"Rally Effect" May Extend to the Stock Market

According to this weekend's Gallup poll (Sept 14-15), three out of four Americans say that Tuesday's attacks will make no difference in their likelihood to invest in the U.S. stock market. While one out of 10 Americans (11%) say they are now less likely to invest in the market, the same number (10%) say the attacks will make them more likely to do so.

Similarly, three out of four Americans (75%) who have money invested in the stock market (57% of all Americans) also say that Tuesday's attacks will make no difference in their likelihood to invest in the U.S. stock market. Again, one out of 10 Americans (11%) who have money invested in the stock market say they are now less likely to invest in the market while about the same number (13%) say they are more likely to do so.

Clearly, there is no panic among the American public over the stock market. And, the "rally effect" may have as many people buying as selling -- at least domestically.

As a result of Tuesday's attacks, are you -- more likely (or) less likely] -- to invest in the U.S. stock market, or will it not make any difference?

 

 


More likely


Less likely

Will not make
any difference

No
opinion

         

National Adults

       

2001 Sep 14-15

10%

11

77

2

         

Stock Investors ^

       

2001 Sep 14-15

13%

11

75

1

         

^

BASED ON --655 -- INVESTED IN STOCK MARKET; ± 4 PCT. PTS.



"Rally Effect" Helps Consumer Outlook

Gallup poll economic data gathered just before Tuesday's attacks (Sept. 7-10) showed that when consumers were asked to rate economic conditions in the country, only about one out of three (32%) said the economy is good or excellent. In sharp contrast and confounding those who may have thought the events of Tuesday would have the immediate effect of sending the public's confidence in the economy reeling, this weekend's poll (Sept. 14-15) shows 45% of consumers rating the economy as good or excellent. Although this is a big improvement, it still stands in sharp contrast to the three out of four consumers (74%) who rated the U.S. economy as good or excellent a year ago (Aug. 18-19, 2000).

How would you rate economic conditions in this country today -- as excellent, good, fair, or only poor?

Gallup Poll economic data gathered Sept. 7-10, 2001, just before the events of Tuesday, showed 70% of Americans saying economic conditions in the country are getting worse while only 19% said they are getting better. This was a deterioration from Gallup's August 2001 reading, when 59% said things were getting worse and 27% said things were getting better. This weekend's poll (Sept. 14-15) shows that consumer perceptions -- instead of falling further -- have actually returned to their August 2001 level, with 60% of Americans saying economic conditions in the country are getting worse while 28% say they are getting better. Of course, the August-September ratings stand in sharp contrast to consumer perceptions of just a year ago (Aug. 18-19, 2000), when 60% of consumers said economic conditions were getting better and only 26% said they were getting worse.

"Rally Effect" Doesn't Extend to the Longer-Term Outlook

When asked whether they expect to be better or worse off a year from now, one out of four Americans (26%) say that they expect to be worse off. This is the highest such rating Gallup has received since June 1993 -- the only other time since July 1984 that this percentage has exceeded 25%. The percentage of Americans saying they expect to be better off a year from now decreased to 58% -- the lowest level for this rating since March 1994.

Looking ahead, do you expect that at this time next year you will be financially better off than now, or worse off than now?

In this same regard, more than one out of three consumers say they are less confident in the future of the economy as a result of the events of Sept. 11. On the other hand, 45% say that last week's events have not changed their confidence in the economy and 16% say they are more confident.

It remains to be seen whether the "rally effect" will carry over to consumers' expectations for the future. If not, then the impact of the economic rally effect will be relatively short-lived.

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