(Editor’s Note: Billie Greer has been reporting quarterly on the Consumer Sentiment Index. This is her third update for Fox and Hounds.) 

The confidence of Los Angeles County consumers continues its downward spiral which is bad news, given that consumption accounts for, on average, 70 % of all U.S. economic activity.

According to the Consumer Sentiment Index released last week by the Lowe Institute of Political Economy at Claremont McKenna College, consumer confidence declined by 7% in the second quarter of 2017, following a modest 2% decline in first quarter 2017 and a steep drop of 12% in fourth quarter 2016.

“We have now seen three straight quarters of decline in Los Angeles’ consumer sentiment, despite a strong local economy and low unemployment,” noted Marc Weidenmier, economics professor at Chapman University and the former director of the Lowe Institute. “This is a sustained decline which we should consider as a strong signal for Los Angeles businesses and government leaders to be mindful that our economy may have peaked and to be prepared for some weakness,” he added.

For the first time, the largest drop in consumer confidence was among Caucasians and men. Weidenmier believes this can be attributed to these demographic groups losing faith in the current administration’s ability to deliver on reducing taxes or other economic incentives that could assist businesses and higher income earners.

According to Weidenmier, differences between Los Angeles County’s largely Democratic populace and progressive positions and the policy changes being advocated by the President cannot be overlooked as a contributor to the consumer mood in Los Angeles County.

The 500-person survey asked respondents about their current situation, perceived prospects, and spending plans.  People were asked to assess whether they see their financial situation getting better or worse over the coming year and how this is linked to their perception of recent business conditions in Los Angeles and in the nation, as a whole.

The largest overall decline in the Index was the outlook for business conditions in the United States – a 13% drop from first quarter 2017.  When asked specifically about Los Angeles County, the Index is down by 9 %.

Los Angeles is the only major metropolitan area in the U.S. with its own consumer sentiment survey. “We decided the Institute would step-up and invest in providing this valuable economic tool because we recognize that the Los Angeles’ economy diverges significantly from other parts of the country,” noted Robert J. Lowe, co-founder of the Lowe Institute and Chairman of Lowe Enterprises, a national real estate company.  “Comparisons to the national surveys highlight that Los Angeles tends to deviate from national trends.”

Will consumer sentiment continue to erode in Los Angeles or will there be a rebound?  Keep an eye on new car sales which, if robust, can be a confidence booster. And, in these uncertain times, the economy needs all the help it can get.

Billie Greer, among other activities, is a Trustee of the Lowe Institute of Political Economy at Claremont McKenna College.