Consumer Sentiment Falls, Will Spending Follow?

Discussion
Jul 15, 2002
George Anderson

The University of Michigan reports that its index of consumer sentiment fell to 86.5 in early July from 92.4 at the end of June and 96.9 in May. Within the overall index, the index of expectations for the future fell to 78.5 in early July from 87.9, reports The Wall Street Journal.

Although consumers are the gloomiest they have been since November, their spending has been firm so far because of offsetting boosts from tax cuts, lower interest rates and higher housing prices. Consumers went on a shopping spree last month at America’s malls and stores, giving major retailers a healthy sales gain after a soft spring. The big discount chains like Wal-Mart, Kohl’s and Target all exceeded Wall Street estimates for June.

Consumers cited concerns about lower economic growth and higher unemployment for their pessimism, and one-third of respondents “cited the possibility that accounting scandals would harm the economy,” according to UBS Warburg.

Mona Doyle, president of Consumer Network Inc., a market research firm in Philadelphia, told the New York Times that cynicism about the integrity of American business is seeping into how shoppers think, although it hasn’t deterred them from shopping, yet. Consumers are connecting what they’re hearing in the news to the low levels of service they’re seeing at clothing stores and the supermarket, according to Ms. Doyle.

Moderator Comment: Do you agree with Mona Doyle’s assessment that consumers perceive retail management (not associates) as “being too busy doing their own thing and covering their own tracks and lining their own pockets to pay attention to consumers?”

We have to admit wondering, while spending nearly twenty minutes at the checkout this weekend with plenty of other shoppers, if the manager at our local supermarket had decided he’d rather be golfing, fishing, etc. [George Anderson – Moderator]

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