Consumer confidence slipping, says Anderson Center

 The California Composite Index of Consumer Confidence declined by about 10 points to 78.6 in the fourth quarter of 2011 compared to the third quarter revised reading of 88.2, says Chapman University’s Anderson Center for Economic Research in its quarterly report on the state’s consumer sentiment.  An index level below 100 reflects a higher percentage of pessimistic consumers versus those who are optimistic. Hence, this decline suggests that consumers’ pessimism grew over the last three months. In contrast, the survey of consumer confidence at the national level conducted by the University of Michigan showed a reading of 64.1 in the month of November increasing from the August reading of 55.7.

The Anderson Center’s California Composite Index is generated based on three indices: consumers’ outlook on current and future economic conditions, and an index measuring consumers’ spending plan. All three components of the composite index declined over the last three months.

Continued high unemployment rate in California, currently at 11.7 percent, and the volatile stock market may be the main factors explaining why consumer assessment of current economic conditions has deteriorated so sharply. This index declined to a reading of 60.8 in November of 2011 from 67.1 in August of 2011. The index measuring future economic conditions also decreased to a reading of 95.8 in November from a reading of 106.8 in August of 2011.  The slow pace of job creation and prospects of additional state budget cuts and potential higher taxes may have dampened consumers’ confidence about future economic conditions.

Moreover, the index measuring consumers’ planned spending on big-ticket items decreased significantly from the August reading of 93.4. The reading of 79.8 suggests consumers’ spending in the early part of 2012 may decline sharply from the current strong pace reported by retailers.

BACKGROUND AND METHODOLOGY:

Beginning in the third quarter of 2002, the Anderson Center for Economic Research at Chapman University launched a survey to measure California consumer sentiment. This survey is similar to the monthly national survey of consumer sentiment conducted by the University of Michigan.

A survey comprised of six questions is mailed to a stratified sample of 5,000 residences throughout the state, with a historical response rate of 5 to 10 percent. Three questions relate to the current economic conditions, two questions address future economic conditions (one year outlook) and one question evaluates the consumers’ current plan for purchasing big ticket items.

The results are summarized into four indices. One index measures consumer sentiment about the current economic condition, a second measures consumers’ future economic expectations, the third is a composite index representing overall consumer confidence, and the fourth index measures consumers’ current spending plan on durable goods.

For more information, visit the Anderson Center’s web site at www.chapman.edu/argyros/asbecenters/acer/