Consumer Pain Is Gallup's Gain


Gallup's new tool gauges consumer confidence daily. Right now, 85% of Americans say economic conditions are getting worse

There's a new traffic report every 10 minutes, and stock prices change by the second. But the two best-known indicators of consumer confidence come out only once a month. That's a long wait between temperature readings. Now, the Gallup Organization is elbowing its way into the consumer-confidence business with an indicator that comes out daily. That's the good news. The bad news? Gallup's latest data show that consumer confidence is still heading toward the basement.

On Apr. 8, Gallup announced that in its latest reading, 85% of Americans surveyed felt that economic conditions in the country as a whole are getting worse, while only 10% felt they're getting better. As for current conditions, 42% of respondents rated them poor; only 18% said they were excellent or good. Those results were the worst in several weeks and equaled the low point of optimism in mid-March. (Gallup began the daily tracking poll on Jan. 2 of this year. For the previous seven years, it had done a monthly version that had received relatively little attention.)

Consumer confidence is closely watched by economic forecasters, including those at the Federal Reserve, because it can influence borrowing and spending. Consumer spending, broadly defined, accounts for about 70% of U.S. economic activity and has long been the main engine of growth. If consumers turn pessimistic and curtail spending, the current slowdown could turn into a substantial recession.

Immediate Reactions

Because they come out daily, Gallup's numbers will help economists analyze how consumer confidence is instantaneously affected by news events, such as terrorist attacks and elections. Those influences tend to get washed out in the monthly readings, says Rick MacDonald, an economist at Action Economics. "You can really pinpoint changes with this," he says.

The two biggies in the field are the Conference Board Consumer Confidence Survey and the Reuters/University of Michigan Surveys of Consumers. The two monthly polls tend to track each other pretty closely. Other readings include the Investor's Business Daily/TIPP Economic Optimism Index and the RBC CASH Index, both of which are also monthly, and the Washington Post-ABC News Consumer Comfort Index, which until now was the frequency champ as a weekly.

Gallup interviews about 500 people by phone each day using a randomized system that's supposed to give every adult an equal chance of being contacted. Each day's report contains a rolling average of the answers from the three previous days, or about 1,500 responses. That's enough to keep the sampling error low and to allow for detailed analysis of results by age, gender, etc.

Asked for a reaction to the new kid on the block, Richard Curtin, director of the Michigan survey, wrote in an e-mail that "more data is always welcome." But he speculated that the Gallup reading "is unlikely to be the home run" that some might think. Kenneth Goldstein, an economist at the Conference Board, said that economists prefer to use indicators that have been around for longer so they can see how they go up and down at different points in the business cycle.

Coy is BusinessWeek's Economics editor.

The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus