Los Angeles Consumers’ Confidence In The Economy Continues To Erode

Billie Greer
Public Policy Advisor, She served as a member of Governor Arnold Schwarzenegger’s senior staff.

The confidence of Los Angeles County consumers in the economy continues the downward spiral that began with the 2016 election, despite a more positive outlook in last quarter 2018, with consumers expressing more concern about the overall U.S. economy than their own personal financial situations.  The data from a recent study also determined that political affiliation continues to be strongly correlated with consumer sentiment in the County, which skews heavily Democratic.

Released last week by the Lowe Institute of Political Economy at Claremont McKenna College, the Los Angeles County Consumer Sentiment Index for first quarter 2019 shows consumers continue to be worried about the current state of the economy with confidence down by 4.2%. When asked about business conditions nationally, consumer angst increased, with confidence dipping by 8.2%.  

According to Cameron Shelton, Director of the Lowe Institute, survey results demonstrate the impact of the national political environment as a filter through which consumers interpret events. The political affiliation of those surveyed in the County continues to influence their level of confidence in the economy. Those who align with the Democratic party register low confidence– 84 on a baseline index value of 100.  Those not aligned with either major party, remain in the middle range of 99. And, the sentiment of Republican consumers remains high but less than last year, moving from 132 to 115.

When the consumer was asked if his/her family would be better or worse financially in the next year, there was less than a ½% decline in sentiment.  “This would indicate that residents of Los Angeles County seem confident that despite the potential for the U.S. economy to falter, they don’t feel their family economic situation is endangered,” observed Shelton.

Shelton concludes, “While significant job hiring still outpaces reductions in the workforce and increases in hours worked outnumber declines, the index points to signs that the employment environment is softening.  Respondents posted a 7.7% downward shift in confidence when asked about their prospects for securing a job if employment is lost. And, compared to past surveys, fewer reported that their hours had been increased while more reported hours had been cut.  The data suggests that moving forward consumers may be more guarded about their spending.

The importance of consumer confidence, which drives buying power, cannot be overstated since consumption accounts for, on the average, 70% of all U.S. economic activity.

Will boom times continue? Or will consumer sentiment continue to erode?  Keep an eye on new automobile sales which, if robust, can be a confidence booster.  Is there a car in your wallet?

Billie Greer, among other activities, is a Trustee of the Lowe Institute of Political Economy at Claremont McKenna College. Los Angeles County is the only major metropolitan area in the nation to have its own consumer sentiment survey, a signature project for the Institute.

 

 

 

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