O.C. Consumer Confidence Nosedives : Poll: The 20-point drop in the UC Irvine annual index is attributed to the worsening outlook for the nation as a whole, the federal deficit and the Persian Gulf crisis.
IRVINE — Consumer confidence among Orange County residents fell sharply in the past year as worries increased about the nation’s faltering economy, the burgeoning federal deficit and the threat of war in the Middle East, according to a UC Irvine annual survey.
The local consumer confidence index fell 20 points from a year ago, the largest drop since UCI began measuring attitudes on the economy in 1986. The increased pessimism in Orange County mirrors a growing uneasiness about the economy nationwide.
“There’s been a dramatic loss of confidence,†said Mark Baldassare, UCI professor of social ecology, who conducted the Orange County Annual Survey.
Still, Orange County consumers are more optimistic than those elsewhere in the country, many of whom have already felt the effects of regional recessions. A declining majority of local consumers also say they are better off financially today than a year ago and that they expect to be so in another year.
The views of local consumers, however, may reflect an ingrained belief in continued growth for the county and in its resilience to recession, Baldassare said. Many surveyed were pessimistic about the nation’s economy but upbeat about their personal financial outlook, he noted.
“It’s largely a loss of confidence in the big picture,†Baldassare said. “They still feel confident about their own finances.â€
For the first time, however, the consumer confidence index in Orange County has dropped below the 100 base level. It fell to 85 from 105 last year, the biggest drop in consumer confidence in the five years that the survey has measured that sentiment.
Nationally, consumer confidence also fell 20 points, from 96 to 76. The national and the local indices--based on five questions about outlook, spending and personal finances--are measured against a base level of 100 established in the national survey in 1966.
Baldassare sees two possible outcomes in the local survey results: less spending and more saving.
A lack of spending over the next few months could affect retail sales in general as well as the key Christmas period, he said. Local consumers are “fearful enough about national trends that they’re much more likely this year to cut back on major purchases and other spending,†he said.
On the other hand, more local consumers report that they are earning more money than they did last year, Baldassare said, and that extra income could well go into savings accounts at local banks and savings and loans.
The survey shows that 49% of the 1,016 adults randomly questioned by telephone last month were earning annual salaries of $50,000 or more. The median income of those being polled rose $4,000 over last year to its highest level, $49,000.
The survey detected a number of significant changes in consumer attitudes:
* Fewer Orange County people than ever before--40% of those polled--believe the nation is headed for good times in the next year, the first time that figure has dropped below 50%. Last year, 68% of those polled were optimistic about the economy.
* More local consumers than ever before--55%--believe the nation is headed for tougher economic times, with a recession and higher unemployment, in the next five years. Only 30% are bullish on the long-term outlook for the economy.
“This is the only time since we’ve been asking questions about the economy that a majority of Orange County residents expects a five-year downturn in the national economy,†Baldassare said.
* Retail sales could fall sharply. Thirty-one percent of consumers surveyed think that now is a bad time to make a major purchase. That is more than double the proportion--14%--who felt that way last year, which recorded the largest previous negative rating.
“It looks like residents may be cutting back on their spending in the coming year,†Baldassare said. That would confirm reports of slumping retail sales both nationally and in Orange County.
* Although 20% of those surveyed believe they are financially worse off than a year ago--the highest level ever for the survey--only 8% believe they will be worse off next year. Nearly half say they are better off today than a year ago, and more than half say they expect to be so in another year.
Consumer confidence could change significantly with major events. Baldassare said that if Congress adopts a budget that does not put too much of a crimp in consumer spending and if the world powers can resolve the Iraq-Kuwait situation peacefully, optimism could return quickly.
The questions on consumer confidence--the same ones the University of Michigan asks in its national poll--are part of UCI’s 9-year-old program of surveying the county’s economic well-being. The margin of error is a plus or minus 3%.
The local survey is supported by donations from 35 Orange County corporations, public agencies and foundations.
CONSUMER CONFIDENCE The consumer confidence index in Orange County fell 20 points in the last year, as residents became concerned about economic trends, the federal deficit and Middle East crisis. But consumers here were more optimistic than those nationally.
The national survey, based on five questions about outlook, spending and personal finances, is conducted by the University of Michigan. Orange County residents were asked the same questions. The index is measured on a base of 100 established in 1966.
Orange County United States 1986 109 92 1987 104 94 1988 106 95 1989 105 96 1990 85 76
Measuring consumer confidence A survey of 1,016 Orange County consumers shows that they think tough economic times have arrived and that this is not a good period to make big-ticket purchases. Still, most local consumers feel that they are better off financially than a year ago. * Is the United States in for good or bad times next year?
1990 1989 Good times 40% 68% Bad times 44% 16% Don’t know 16% 16%
* Is the United States in for good or bad times in the next five years?
1990 1989 Good times 30% 48% Bad times 55% 39% Don’t know 15% 13%
* Is now a good or bad time for major purchases?
1990 1989 Good time 46% 66% Bad time 31% 14% Don’t know 23% 20%
* Are you financially better or worse off than last year?
1990 1989 Better off 49% 50% Worse off 20% 14% Same 31% 36%
* Will you be financially better or worse off next year?
1990 1989 Better off 52% 56% Worse off 8% 7% Same 36% 34% Don’t know 4% 3%
Source: Orange County Annual Survey conducted by Mark Baldassare, UC Irvine
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