Mass. consumer confidence rebounds from 2011 lows

Consumer confidence in Massachusetts is on the rise, an indication that the state’s residents are starting to feel the benefits of the economic recovery and that incumbent politicians may have a positive story to point to as the 2012 campaign season heats up.

Buoyed by a string of positive economic news, the MassINC Polling Group Index of Consumer Sentiment climbed to 78.4 in January, up substantially from 59.6 in October of last year (see Trend Monitor). The largest gains in the index came from consumers’ perceptions of future business conditions as well as anticipated improvements for the overall economy.

Bay State residents are starting to see the future of the economy as something to potentially look forward to, rather than something to dread. This quarter, 40 percent said they expected good economic times for the country as a whole, compared to 45 percent who see bad times ahead, nearly identical to perceptions of near term business conditions. While these ratios are still tilted slightly negative, they represent a major improvement from the 22 percent who anticipated good times when asked the same questions in October. 

At the personal level, consumers are also beginning to see their own financial situations in a more positive light, with 31 percent saying they expect improvement in personal finances in the year ahead, compared to 13 percent who say the next year will be worse. This improvement may benefit Massachusetts retailers, as more residents say this is a good time to purchase appliances and other big ticket items. About half (49 percent) now call it a good time to buy, compared to 35 percent who said the same in October.

Contributing to the brightening mood, the S&P posted a larger percentage gain in January than in any year since 1997, and state unemployment rates are declining. According to analysis by the Patriot Ledger, all but 11 towns in Massachusetts saw declining unemployment in 2011. In addition to the economic implications, rising consumer confidence may also reshape the political landscape, as the message of ongoing economic malaise loses at least some of its immediacy.

To be sure, the gains in consumer confidence may be fragile, vulnerable both to negative economic news as well as a new Washington-fueled crisis of confidence. The debt ceiling negotiations of 2011 drove consumer confidence down, from 68.0 in April to 59.4 in July, and the percentage with a favorable view of Congress fell 19 points at the same time. The August release of the national Reuters/University of Michigan Surveys of Consumers noted, “Never before in the history of the surveys have so many consumers spontaneously mentioned negative aspects of the government’s role in the economy, and never before have consumers rated economic policies so unfavorably.”

Given the tone of this election year so far, a repeat performance is hardly out of the question. Such an event could easily undo all of the gains in confidence brought about by real improvements in the economy.

MassINC Polling Group Index of Consumer Sentiment

About the Polls – These results are based on questions from The MassINC Polling Group statewide polls of Massachusetts residents.  Live telephone interviews are conducted via both landline and cell phone using conventional random digit dialing (RDD) sampling methods.  Interviews are conducted in both English and Spanish by Eastern Research Services. 

About the Index of Consumer Sentiment – The CommonWealth Index of Consumer Sentiment (ICS) is based on the national Index of Consumer Sentiment, a consumer confidence index published monthly by the University of Michigan and Thomson Reuters. A composite of five questions about current and future economic conditions, the Index is best interpreted by comparing it to previous levels rather than as an absolute number. The national ICS was in the mid 80s to low 90s in the periods leading up to the financial crisis of late 2008. The ICS is made up two component indices, the Index of Current Economic Conditions, which measures present sentiments, and the Index of Consumer Expectations, which represents future prospects.  The consumer confidence measures were devised in the late 1940’s by George Katona at the University of Michigan. The measures have now developed into an ongoing, nationally representative survey based on telephonic household interviews. The Index of Consumer Sentiment (ICS) is developed from these interviews. The Index of Consumer Expectations (a sub-index of ICS) is included in the Leading Indicator Composite Index published by the U.S. Department of Commerce, Bureau of Economic Analysis.

Steve Koczela is president of the MassINC Polling Group.

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