Confidence Overall Stays Steady

But Buying Climate Bears Watching

Analysis by DREW ALLEN

 

Feb. 22, 2006 Settling down after a bumpy ride, consumer confidence held more or less steady this week, keeping near its average this year although below its long-term norm in weekly polls over the past 20 years. One cause for concern: anemic ratings of the buying climate.

The ABC News/Washington Post Consumer Comfort Index stands at -13 on its scale of +100 to -100. It's stabilized between -11 to -13 the last three weeks after a month of unusual week-to-week swings down, up and down by four and five points in January.

The index is based on ratings of the national economy, Americans' personal finances and the buying climate. Ratings of the buying climate are notably weak: This week just 33 percent rate it positively, the lowest percentage since Nov. 20 and down eight points this year.

That may reflect the impact of gasoline prices down 12 cents in the last three weeks but still high by historical standards and perhaps other inflationary pressures. Federal Reserve Chairman Ben Bernanke, before a congressional panel last week, suggested that further interest rate hikes may be needed to curtail inflation.

At -13, the overall index is four points below its long-term average since December 1985, but matches its yearlong average last year.

INDEX Ratings of the economy overall and personal finances are holding up better than views of the buying climate. Fifty-seven percent say their personal finances are in good shape and 40 percent rate the economy positively, each precisely matching its long term-averages. Ratings of the buying climate, by contrast, are five points below average.

The decline in positive ratings of the buying climate since the start of the year has been fairly broad based, but most pronounced in the West, where overall confidence has been the most changeable lately.

TREND The CCI overall is down from -8 at the start of the year but well up from its recent low of -23 when gas prices spiked after Hurricane Katrina last fall. It's averaged -9 since it began, ranging from a high of +38 in January 2000 to a low of -50 in February 1992.

GROUPS As usual, confidence is higher among better-off groups. The index is +40 among higher-income Americans but -43 among those with the lowest incomes, +4 among college graduates while -49 among those who haven't finished high school, -6 among whites but -50 among blacks and -3 among men while -23 among women. It's far higher among Republicans (+30) than among Independents (-14) or Democrats (-35).

Regionally, at -7 the index is best in the West, compared with -24 in the Northeast, -13 in the South and -11 in the Midwest.

Here's a closer look at the three components of the ABC/Post CCI:

NATIONAL ECONOMY Forty percent of Americans rate the economy as excellent or good; it was also 40 percent last week. The highest was 80 percent on Jan. 16, 2000. The lowest was 7 percent in late 1991 and early 1992.

PERSONAL FINANCES Fifty-seven percent say their own finances are excellent or good; it was 58 percent last week. The best was 70 percent on Aug. 30, 1998, matched in January 2000. The worst was 42 percent on March 14, 1993.

BUYING CLIMATE Thirty-three percent say it's an excellent or good time to buy things; it was 35 percent last week. The best was 57 percent on Jan. 16, 2000. The worst was 20 percent in fall 1990.

METHODOLOGY Interviews for the ABC News/Washington Post Consumer Comfort Index are reported in a four-week rolling average. This week's results are based on telephone interviews among a random national sample of 1,000 adults in the four weeks ending Feb. 19, 2006. The results have a three-point error margin. Field work by ICR-International Communications Research of Media, Pa.

The index is derived by subtracting the negative response to each index question from the positive response to that question. The three resulting numbers are added and divided by three. The index can range from +100 (everyone positive on all three measures) to -100 (all negative on all three measures). The survey began in December 1985.