The NPD Group‘s recent Economy Tracker report shows that consumer attitudes and their intention to shop is at its lowest level since October. According to the company’s press release however, consumers’ concern for job security appears to be leveling off, which could mean they are preparing to spend again.
The Economy Tracker measures consumer concerns regarding the economy on a scale between 0 and 100, with 0 being “Very Concerned” and 100 being “Very Confident.” In February, the Economy Tracker’s General Economic Perception indicator fell to 36.7, from 38 in October. Outside of a slight lift in January, the indicator has moved steadily downward since October, the first month of reporting.
Mirroring consumer concerns about the economy was a decline in consumer shopping intentions. The Economy Tracker’s Retail Response Indicator measures consumer spending intentions on 0 to 100 scale, with 0 representing “Reduce or Spend Less” and 100 representing “Spend More.” The Retail Response Indicator dropped more than 2 points to 35.4 in February.
“One important thing to note here is that the 2 point drop in how consumers feel about the economy in general translates to a 5 point drop in what consumers’ purchase intentions are,” noted Marshal Cohen, chief industry analyst, The NPD Group, Inc. “And while a 5 point drop doesn’t seem like much, it represents millions of dollars.”
Despite consumers’ fading confidence regarding the economy in general, NPD did find evidence of a potentially positive sign in the leveling off of consumers’ concern regarding job security.
According to Cohen, “Of all the data I look at, this measure provides one of the best indications of how consumers are going to behave. February’s results show consumers feeling better on this front and could signal consumer stabilization, a point at which consumers catch their breath, reassess and prioritize their purchase needs in preparation to begin spending again. Stabilization is a pre-cursor to growth.”
“While, I think it’s premature to talk ‘recovery,’ I think if we are able to spot signs of stabilization, we’ll be better positioned for recovery and then the return to growth.” noted Cohen.
THE REAL WORLD RETAILING TAKEAWAY
A burgeoning recovery is only as strong as consumer confidence.
The Conference Board Consumer Confidence Index™ plummeted further in February, registering its lowest numbers ever. That doesn’t bode well for an economic recovery. However, the recent Wall Street rally coupled with small indications of potential positivity (e.g. the report referenced above and even headlines that read “4 ways to prepare for the rebound”) could signal and help propel consumers toward increased confidence, thereby, albeit slowly, allowing the economy to recover.
Two weeks ago, we were hearing a 2010 recovery at the earliest. Now Federal Reserve Chairman Ben Bernanke is saying later this year.
With far too many experts and analysts making predications that are all over the map, consumers will have to judge for themselves, based on their personal situation, when their consumer confidence is high enough to allow them to spend again. Until then, it may be the longest game of wait and see ever played.