Despite the continued strength of the economy, the confidence of Los Angeles County consumers in the economy is tepid, continuing a four year downward spiral, due in part to the political environment on the national level. However, consumers are more optimistic about local business conditions, according to a recent study.
Released last week by the Lowe Institute of Political Economy at Claremont McKenna College, the Los Angeles Consumer Sentiment Index for third quarter 2019 indicates that when LA County consumers were asked about their family’s financial situation over the coming year, confidence dipped more than 6% over the previous quarter, while concerns over the impact of national business conditions on the consumer drove sentiment down by nearly 4%.
“In a region dependent on trade and dominated by Democrats, Los Angeles County respondents remain resolutely worried about the current political environment. This quarter, the impeachment investigation of the president and a proposed wealth tax may be driving anxieties despite an impressive rebound in the labor market,” noted Cameron Shelton, the Institute’s director.
Although those with higher education and higher income were found to be more optimistic about the economy than in the previous quarter, those with income above $150,000 per year were markedly more pessimistic, likely due to various forms of a wealth tax espoused by some Democratic presidential candidates. Consumers with lower education levels and lower incomes moved toward pessimism.
By contrast, when the consumer was asked how he/she was personally affected by local business conditions in Los Angeles, sentiment ticked up by 4% over last quarter. Despite this trend, Shelton suggests that fear about the future appears to be dampening enthusiasm for the present. When respondents were asked if the coming year would be a good time to look for a new job, sentiment was basically flat.
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.
New car sales, if robust, can be a confidence booster. However, the Index indicates that consumers remain hesitant about big ticket items. When asked if the coming year would be a good time to purchase an automobile, sentiment dipped by nearly 5%.
Will LA County consumers’ confidence in the economy continue to slip or rebound? Looking ahead, keep an eye on vehicle sales for a possible clue. 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.