Americans Remain Downbeat About The Nation's Economy

GALLUP NEWS SERVICE

PRINCETON, NJ – All eyes will be on the economy today as President Bush convenes an economic summit at Baylor University in Waco, Texas and as the Federal Reserve meets to consider whether or not to raise interest rates. Both of these major events occur at a time when the average American's rating of how things are going economically remains low.

Major conclusion

There is little question about the viewpoint of the average American: Gallup's first August readings on the economy show little change in the public's downbeat assessment of the economy measured over the last month.

Americans are now giving the U.S. economy the lowest ratings on Gallup's measures in some time. An even worse sign: there's not much public optimism that things are getting better. After a brief flirtation with rising optimism in late July, consumers have returned to their more customary (at least as of late) pessimistic state.

The poll also shows a slight deterioration in Americans' feelings that it is a good time to spend "on the things they want to buy", a finding which has potentially negative implications for the course of the economy.

Still, the continuing presence of terrorism as a public concern means that top-of-mind recognition of the economy as the nation's number one problem is not nearly as dominant as it has been in the past, and overall satisfaction with the way things are going in the country is at mid-range, slightly above average levels.

Details

• Over four measurement points in July and early August, 28% of the public rated the U.S. economy as excellent/good. An average of 21% rated the economy as poor.

• These readings are low in the context of the last decade and also lower than they were during the mini-rally of April and May of this year. For the four previous months, March - June, the excellent/good rating averaged 37%. For November-February 2001 it was almost as low as July's, at 30%. It was 40% in September and October, reflecting the rally effect after 9-11. In the summer of 2001, it averaged 38%.

• The average since 1992 on this measure (% rating the economy as excellent or good) has been 41%. The last time readings on perceptions of the current economy were as low as they are now was January and February of this year, and before that, 1996.

• Americans' responses to a question that asks if the economy is getting better or getting worse move fairly quickly, often more so than is the case for basic ratings of the current economy. In fact, the data show a good deal of movement on this measure over the last 5 weeks. The public became quite negative on the direction of the economy in early July, and then became more positive by the end of July. But, by last week Americans had returned to their more negative outlook. The movement was significant. From mid-June to early July the percentage saying the economy was getting worse went from 40% to 57%. In the late July poll, this negative evaluation fell back to 47%. (The July 29-31 poll came on the heels of two days of sharp increases in the Dow, which may be the reason for these increases.) By August 5-8, the getting worse number was back to 55%. Just 32% currently say the economy is getting better.

• Gallup's classic measure of satisfaction with the way things are going in the United States is not nearly as negative as are ratings of the current economy. Satisfaction averaged 48% in July and early August, above the historical average for the past decade -- 43%.

• Thirty six percent of the population now says that the economy is the nation's number one problem. This is slightly lower than last month, and is as low or lower than at any other point this year. The measure is certainly nowhere near as high as it was in the early 1990s.

Implications

Broad measures about the most important problem facing the country and overall satisfaction with the way things are going in the country suggest that the consciousness of the average American is not overwhelmed by the economy to the degree it has been at other points of economic stress in the past. This is no doubt due in large part to the impact of Sept. 11 and terrorism, which crowd out the "mental space" Americans might otherwise give to the economy.

The statistical relationship between ratings of the economy and satisfaction since Sept. 11 has been low. Satisfaction took on a life of its own after the terrorist attacks, driven higher by a general rally effect that swept the country even as the economy slipped. Only in the last two months has the level of satisfaction dropped -- more in line with ratings of the economy.

The continuing concern over terrorism may also help explain why presidential approval ratings have remained high, and the reason that top-of-mind mentions of the economy as the nation's number one problem are still well below 50%.

But, when Americans are asked directly about the economy, the ratings are not good. They are no worse than they were at selected points within the last year, but before that only the mid 1990s demonstrated economic assessments this bad.

The implications of consumers' dour views on the national economy on retail spending are difficult to pin down.

At some point, the negative ratings of the national economy can be assumed to have enough of a negative effect on the mood of the average American to affect his or her willingness to spend – a key economic concern.

Along these lines, recent polling finds that Americans' self-reported propensity to spend is flat and declining slightly. Gallup has been asking Americans since last October to indicate how good a position they believe they are in to "buy some of the things you would like to have". From last October through this past June, the percentage of Americans saying they are in a somewhat or very good position has generally been around 50%. This dropped very slightly to 48% in July, and to 46% by last week. If this trend continues, it could be a significant indicator of a translation of concerns about the national economy into a more personal slow down in consumer spending.

Survey Methods

These results are based on telephone interviews with a randomly selected national sample of 1007 adults, 18 years and older, conducted August 5-8, 2002. 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.

In general, are you satisfied or dissatisfied with the way things are going in the United States at this time?

What do you think is the most important problem facing this country today? [Open-ended]

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