Economic Outlook

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Consumer confidence in the economy has been sliding for over a year, and after a brief rebound, has fallen since September 11. The question remains as to the extent to which the attacks will intensify this trend, particularly as it relates to consumer spending.

Myriad polls show a slump in confidence even before the terrorist attacks. Despite the rally effect, consumer confidence has begun to tumble again. According to the University of Michigan's monthly report on consumer sentiment, based on 500 interviews, consumer confidence fell to a rating of 81.8 in September, from 91.5 in August. The study shows that the attacks created a brief surge in confidence — up 4.7 points the week after the attack — followed by a deeper plunge (down 16.1 points the following week), though the rating was back up to 82.7 in October.

Another consumer confidence index, created by business membership and research network The Conference Board, shows a similar drop. The Board's index, which is based on a representative sample of 5,000 households, dropped to 85.5 in October, from 114 in August — the steepest fall since October 1990. According to the survey, fewer than 1 in 5 consumers rated business conditions as favorable, down from more than 1 in 4 in the previous month.

The August Economy

While most people believe that “everything changed� on September 11, it's worth looking at pre-attack polls to assess consumers' thoughts on the direction of the economy. According to the Gallup Organization, the decline in consumer confidence can be traced back to the fall of 2000, when the economy was still bustling and the presidential election had yet to take place. By August, consumer pessimism was at its highest levels since Gallup started polling about personal finance in 1976, with only 8 percent rating their personal financial situation as “excellent.� With the stock market falling and the job market unsteady, it probably won't help that only 9 percent in August said they were saving “a lot,� while 35 percent were just managing to make ends meet and 16 percent were either drawing on savings or running into debt.

Rally, then Recede

Traditionally, wartime produces a rally effect among consumers, boosting public opinion across the board in the short term. Patriotism becomes equated with faith in public institutions and confidence in a strong economy. September 11 was no exception.

However, the number who thought the economy would improve in the longer term — over the course of the next year — is less clear. While many economists have determined that we are currently in a state of recession, slightly fewer than half of Americans agree (49 percent in an October 11-14 Gallup poll of 1,011 Americans). The percent of Americans saying the economy is getting better rose to 33 percent between October 11-14, from 28 percent September 14-15. But when asked about the economy a year from now, respondents painted a less rosy picture. In an Ipsos-Reid poll of 1,000 adults taken between September 21-23, only 46 percent thought their personal economic situation would improve over the next year, while 54 percent thought it would remain the same or get worse.


Economists say the outlook is bleak, but Americans are loath to agree.

Do you think the economy is in a recession or not?

October 11-14, 2001 49%
September 21-22, 2001 52%
September 7-10, 2001 51%
May 10-14, 2001 33%
September 11-15, 1992 79%
January 3-6, 1992 84%
March, 1991 81%
Source: Gallup Organization


Most polls do not yet reflect a significant slowdown in spending since 9/11. However, the urge to splurge was already seeing a lull prior to the attacks. In an August 5 survey by Money/ABC News, when consumers were asked whether this was an “excellent,� “good,� “not so good� or “poor� time to buy things you want or need, “considering the cost of things today and your own personal confidences,� 59 percent agreed it was not the time to shop, up from 46 percent in September 2000. One survey shows spending returning to normal within three weeks of the attacks. In a “flash� study conducted between September 21-25 by Knowledge Networks among its nationally representative panel of 1,450 members, 77 percent said their willingness to make a major purchase in the next six months hasn't changed, and 7 out of 10 said they are just as likely to invest. An equal number said their level of confidence in the economy hasn't shifted. In a Gallup poll taken on September 14-15, 10 percent of adults said the attacks made them more likely to invest in the U.S. stock market (11 percent said they were less likely).


  • Consumer confidence must be viewed within the context of a months-long decline.
  • The post-attack boost in consumer confidence was comparatively slight. Many polls didn't show an increase in confidence, but rather a steadiness of consumer confidence indicators following the attack. Compared with the near 40-point post-attack increase in President Bush's approval rating (from 51 percent to 90 percent in a matter of days), the economic rally hasn't been strong.


  • A delicate balance needs to be struck. On the one hand, consumers equate economic confidence with faith in America. As such, they do not want to hear that the economy is in trouble. On the other hand, many consumers are starting to feel some financial strain or are concerned they will in the near future. Businesses should be careful that they do not ignore those realities.
  • A blend of idealism and pragmatism is emerging. Marketers should appeal to consumers' desire for value — not only in a fiscal sense, but in a moral sense as well. Americans want good quality and good value from good companies doing good things. Offering affordable, durable, smart goods and services appeals to their yearning for comfort, stability and reassurance.
  • Marketing messages should be straightforward, honest and down-to-earth. This is not the time for messages about luxury or indulgence, which can come across as insensitive or irrelevant. Neither is it the moment for cheap solutions and quick fixes. People want to feel confident that what they're getting is the “rightâ€? product, something they can count on, something that will deliver on its promise.
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