A Downbeat Obama Can Send Spending Down

Nielsen Data Show Bad News, Sober Messages Can Curtail Consumer Confidence, Purchasing

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NEW YORK (AdAge.com) -- Barack Obama's downbeat inaugural address appeared to reverse an uptick in consumer spending that followed his election, according to research from Nielsen Co. presented at the Advertising Research Foundation Re:Think 2009 conference yesterday.

The research giant recently formed a government and public-policy branch that is developing an analytical tool for Mr. Obama to track public reaction to his policies. Nielsen has been meshing its data from retail scanners, consumer panels and online buzz with other public data sources since August to track the impact of news on the economy.

Barack Obama's inaugural address
Barack Obama's inaugural address
Not surprisingly, discretionary sales and consumer confidence declined sharply after the failure of Lehman Brothers and the bailout of AIG in September, said Paul Donato, chief research officer of Nielsen.

Following the November election, however, consumer sentiment, confidence in the Troubled Asset Relief Program bailout package and consumer sales started to pick up, according to Nielsen data. After Treasury Secretary nominee Timothy Geithner announced plans for a stimulus package in November, sales of home furnishings in subsequent weeks rose 30% compared to the prior year, said Alex Cotter, associate manager of global financial services for Nielsen.

Indeed, at one point by January, consumer spending was indexing ahead of the prior year. "Between the election and the inauguration [consumer behavior] was about completely opposite anything else we've seen through this [recession] process," said Mr. Donato.

But after an inauguration speech and discussion by Mr. Obama about the economy being "weakened," Mr. Cotter said "discretionary sales almost fell off the map."

"I think everyone was expecting it to sound like the election and an election speech and something focused on hope and things are going to get better," Mr. Donato said. "The words in the press coverage following the speech were sobering, and you can see how fast consumer spending reacts to the inaugural speech."

It's among several indicators that news, and the sentiment it generates, does have a quick impact on consumer spending. Online sentiment about the TARP bailout package as measured by Buzzmetrics have closely tracked, but also foreshadowed, changes in consumer sentiment and spending in recent months, according to Nielsen.

Another indicator that bad news drives down spending have been ratings for financial-news network CNBC, which have been highly inversely correlated to consumer spending, Mr. Donato said. In other words, the more people watch CNBC, the less they buy, though, given the network's reach, that's more likely an indicator that dire financial news drives traffic to the network rather than the network directly dampening consumer spending.

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