4:08pm

Tue June 28, 2011
Economy

Americans Remain Unsure Of Economy's Future

Nearly two years after the official end of the recession, Americans still remain unconvinced.

Consumer confidence has hit an eight-month low, according to a Conference Board report released Tuesday. The group studies how Americans feel about business conditions and the job market.

It turns out consumers aren't feeling so hot about the prospects for the future, which economists say could be a self-fulfilling prophecy.

This can be seen in any parking lot of a big-box store.

"We've obviously cut back with not knowing what's going on, and are trying to put more into savings, and not taking vacations and stuff like that," says Helena Gramann, who was shopping at a Novi, Mich., Target and Costco.

She and her husband, Greg, were going to the store with coupons, which is something they haven't always done.

A Tight Budget

"It's generally not like splurging as much," she says. "As you see something, you think about it little bit more before purchasing it. Try to stick to the budget a little bit more."

The Grammans say they're doing just fine — both still have jobs — but they're saving just to be safe.

Chris Christopher, an economist with IHS Global Insight, says that's exactly the problem.

"In a downturn, the No. 1 problem is basically confidence," he says. "Trying to get people to spend a little more, and it's a very difficult thing to do."

Christopher says one of the drags on consumer confidence are gas prices, which are up about a dollar a gallon from last summer.

"Consumers can't go to their boss and say, 'Hey, I want a higher salary this month because gasoline prices went up,' " he says. "They're going to have to make ends meet, and they're going to have to think of what to do. Dip into savings, use their credit card — if they still have a credit card."

Meanwhile, Gary Bradshaw with Hodges Capital Management in Dallas says the cost of energy isn't just affecting consumers.

"I think it reflects on the people out there hiring," he says. "When they see their costs up pretty dramatically in a short period time, it causes the fella that actually needs to hire people to pause a little bit."

And that adds to lack of confidence.

Consumers Sensitive To Bad News

Stacey and Patrick Grayson from Southfield, Mich. — one town over from Novi — said the high gas prices have made them stick a little closer to home.

"Our anniversary was yesterday and we wanted to go to Niagara Falls, but we're here in Novi," Stacey Grayson says.

"We just wanted to get out, get away from Southfield," Patrick Grayson says. "So we spent some time at the Sheraton."

Ken Goldstein, who works for the Conference Board, said the Graysons' story shows where most Americans are right now.

He says consumers are responding to months of bad news about the economy. But what if there were some good news?

"Consumers are likely to treat that much better than another piece of bad news," he says. "If that sort of balance begins to change a little bit, that's when you'll start to see consumer confidence really change — hopefully for the better."

Goldstein says things are likely to say where they are now, at least for a while.

Copyright 2011 National Public Radio. To see more, visit http://www.npr.org/.

Transcript

MELISSA BLOCK, host:

Two years have passed since the recession officially ended, but many Americans aren't buying it. Consumer confidence has hit a seven-month low. That's according to a report released today by the Conference Board. The group studies how Americans feel about business conditions and the job market.

As NPR's Sonari Glinton reports, consumers' anxiety about the economy could be a self-fulfilling prophesy.

SONARI GLINTON: If you want to know how consumers feel about the economy, you only need to go to the parking lot of one of those big-box stores. I went the parking of a Target and a Costco in Novi, Michigan, a sort of affluent suburb of Detroit.

Ms. HELENA GRAMANN: We've obviously cut back with not knowing what's going on and try to put more into savings and not taking vacations and stuff like that.

GLINTON: Helena Gramann and her husband Greg were going to the store with coupons, something they haven't always done.

Ms. GRAMANN: Generally not, like, splurging as much as, you know, you see something and you think about it little bit more before purchasing it, try to stick to the budget a little bit more.

Mr. GREG GRAMANN: There wasn't a budget before.

(Soundbite of laughter)

Ms. GRAMANN: It wasn't a worry.

GLINTON: The Grammans say they're doing just fine. Both have jobs, but still they're saving more just to be safe. Chris Christopher says that's exactly the problem. He's an economist with IHS Global Insight.

Mr. CHRIS CHRISTOPHER (Economist, IHS Global Insight): In a downturn, the number one problem is basically confidence, trying to get people to spend a little more. And it's a very difficult thing to do.

GLINTON: Christopher says one of the drags on consumer confidence has been gas, which is up about a dollar a gallon from last summer.

Mr. CHRISTOPHER: Consumers can't go to their boss and say, hey, I want a higher salary this month because gasoline prices went up. They're going to have to make ends meet, dip into savings, use their credit card, if they still have a credit card.

GLINTON: Meanwhile, Gary Bradshaw with Hodges Capital Management in Dallas says the cost of energy isn't just affecting consumers.

Mr. GARY BRADSHAW (Hodges Capital Management): I think it is reflects on people out there hiring. When they see their costs up pretty dramatically in a short period time, it causes the fellow that actually needs to hire people to pause a little bit.

GLINTON: And that adds to lack of confidence. Let's go a back outside to Novi, the suburb of Detroit.

Ms. STACEY GRAYSON: Especially with gas being $4 a gallon. I mean, we're not going out town. We're not flying. We budget in what we do.

GLINTON: This is Patrick and Stacey Grayson.

Ms. GRAYSON: Our anniversary was yesterday, and we wanted to go to Niagara Falls, but we're in Novi.

(Soundbite of laughter)

GLINTON: Oh, so you didn't go on a vacation.

Ms. GRAYSON: No, we didn't: cost.

Mr. GRAYSON: We just wanted to get out and be away from Southfield. So we came out here, to spend some time at the Sheraton.

GLINTON: All right, so Southfield Michigan, where the Graysons live, is one town over from Novi, Michigan, where the Graysons were shopping.

Ms. GRAYSON: We came to Novi to the Sheraton, yes. So we had a view of the front, and we can look at the pond, and we can look at the - what kind of birds were there?

Mr. GRAYSON: Geese.

Ms. GRAYSON: We can look at the geese.

(Soundbite of laughter)

Mr. KEN GOLDSTEIN (Conference Board): You know, I think in a nutshell, this tell us kind of where we are right now.

GLINTON: Ken Goldstein is with Conference Board. He says right now consumers are responding to months of bad news about the economy. But if there were some good news, a steady stream of good news...

Mr. GOLDSTEIN: Consumers are likely to treat that much better than another piece of bad news. If that sort of balance begins to change a little bit, that's when you'll start to see consumer confidence really change, hopefully for the better.

GLINTON: How likely is that to happen?

Mr. GOLDSTEIN: Not likely.

(Soundbite of laughter)

GLINTON: Goldstein says things are likely to stay about where they are now at least for a while.

Sonari Glinton, NPR News. Transcript provided by NPR, Copyright National Public Radio.

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