Posted on: Friday, May 6, 2005
Consumers feeling a bit of gloom
By Barbara Hagenbaugh
USA Today
Americans have grown gloomier recently about the economic outlook, according to a new survey that suggests that high gasoline prices, moderate job growth and rising interest rates are taking a toll on consumers' views of the future.
The survey confirms data from the Conference Board and the University of Michigan that have indicated a decline in consumer confidence in recent months.
"There are a lot of headwinds," says John Bitner, chief economist at Eastern Bank in Boston.
Bitner says the declines are not a surprise.
Interest rates are rising on credit cards and home equity loans, and gasoline prices recently hit an all-time high, factors that are likely squeezing household budgets. Plus, although employers have created jobs every month since June 2003, job growth has still been relatively moderate, leading to continued uncertainty about the employment picture.
Still, Bitner and other economists do not expect consumers to slam their wallets shut and retrench. Even when confidence was declining in the wake of the Sept. 11, 2001, terrorist attacks, consumers proved surprisingly resilient, snapping up homes, cars and other big-ticket items that require long-term financial obligations.
"The correlation between these confidence surveys and the economy is pretty weak," says Charles Lieberman, chief economist at Advisors Financial Center in Paramus, N.J.
The International Council of Shopping Centers yesterday said retail sales were up in April from a year ago. Sales were particularly strong at high-end stores, where customers are less likely to be affected by higher gas prices.
When asked about high gasoline prices, more than three-quarters of the Americans surveyed last weekend said they thought current prices at the pump were "unfair," and most expected that gas prices would continue to rise.
When asked who is to blame for the higher gasoline costs, the respondents were more likely to point the finger at foreign oil producers, U.S. oil firms and the Bush administration than on U.S. consumers who drive autos that use a lot of gasoline.
In a USA Today/CNN/ Gallup Poll conducted April 29 through May 1, 51 percent of the 1,006 adults surveyed said they expect the economy to be "very good" or "somewhat good" a year from now. That was down from 60 percent in a survey in mid-December and is the lowest percentage since the question was first asked in October 1997.
