Confidence Closes Out 2008 With Worst 4th Quarter Ever
Just 6 Percent of Americans Rate the National Economy Positively
Analysis by Patrick Moynihan
Dec. 30, 2008
Consumer confidence struggled through its second-worst year capped off by the worst fourth quarter ever. Along the way, it set or tied new lows four times.
The ABC News Consumer Comfort Index closes the year at -49 on its scale of +100 to -100, about the same as last week's -48 and 1 point off its fourth-quarter average -50, its lowest quarter ever, surpassing the previous mark -47 in Q1 of 1992.
Ratings of the national economy hit an all-time low this week, with just 6 percent of Americans saying it's in excellent or good shape, while ratings of the buying climate backed off their record low in October to a four-month high.
Starting the year at -20, the CCI never got better, and the final stretch was its worst: Confidence lingered for six weeks at or below -50 from mid-November to mid-December, bottoming out at -54 on Dec. 1. It's been -50 or lower only 11 times in 1,200 weeks of ongoing polls, 10 of them this year.
There's been a continual stream of bad news for consumers in 2008: Real estate values plummeted in the wake of an historic financial meltdown requiring a federal bailout, the stock market suffered record losses, unemployment hit a 15-year high, gas prices peaked at $4.11 in July (their highest on record), retailers suffered their worst Christmas season in years and official word came down that the U.S. economy has been in recession since December 2007.
INDEX ??? The CCI is based on Americans' ratings of the economy, their personal finances and the buying climate. As noted, only 6 percent rate the economy positively, a record low and the weakest of the three measures.
Positive ratings of the economy have been below 10 percent for the last eight weeks, exceeded only by a 13-week run in early 1992; they're down 25 points on the year and 33 points off the long-term average. They've averaged 15 percent on the year ??? only 1992 was lower at 10 percent.
Twenty-five percent rate the buying climate positively ??? its best since mid-September, up 5 points since early December. However, it's down 6 points this year and 13 points below the average. Twenty-five percent or fewer have rated the buying climate positively for 39 straight weeks, the longest such run on record. Positive ratings of the buying climate averaged 23 percent for 2008, the lowest for any year on record.
Forty-five percent rate their personal finances positively, down 13 points this year and 12 points off the average. Fewer than a majority have rated their finances positively for 23 weeks, the longest such stretch since 1992-93. The overall average for the year was 49 percent positive, the lowest since 1993.
TREND ??? As noted, the CCI started 2008 at its best, -20, sunk to -37 in February, rebounded to -30 in March, but then hit a then-record low of -51 in May. It recovered to -41 in July and September, but then weakened again: It was -50 or below from mid-November to mid-December.
With its late-year slump, the CCI ultimately finished with the lowest fourth-quarter average on record, -50. The CCI has fallen sharply the past two years, averaging -2 in Q1 of 2007, -9 in Q2, -12 in Q3 and -18 in Q4. That skidded to -31 in the first quarter of this year, -44 and -45 in Q2 and Q3, then to -50 this quarter.
At -49 the CCI is 7 points below its average for the year and finished 2008 29 points below where it began, the second-worst drop on record, exceeded only by the 36-point plunge of 2001.
The index averaged -42 for the year, surpassed only by -44 in 1992. Its best yearlong average was +29 in 2000; its best week, +38 in January 2000.
GROUPS ??? The CCI has been negative across demographic groups for 27 straight weeks, a streak surpassed only by a 33-week stretch in 1991-92. Income as usual marks the biggest gap; it's -31 among people with the highest incomes (their worst on record) compared with -62 among those with the lowest. The index is -44 among people who've been to college vs. -61 among high-school dropouts; and -59 among women (matching their worst rating) vs. -37 among men. It's -64 among renters vs. -44 among homeowners.
Racial and partisan gaps are narrower than usual. The index is -48 among whites vs. -53 among blacks, a slight 5-point gap. In available data since 1990, the average gap has been 29 points; this year alone, it's averaged 21 points.
The index is -35 among Republicans this week, -47 among independents and -59 among Democrats. The 24-point difference between Republicans and Democrats compares with an average gap of 41 points for the year and 33 points since 1990.
Here's a closer look at the three components of the ABC News CCI:
NATIONAL ECONOMY ??? Six percent of Americans rate the economy as excellent or good, a record low; it was 8 percent last week. The highest was 80 percent on Jan. 16, 2000.
PERSONAL FINANCES ??? Forty-five percent say their own finances are excellent or good; it was 46 percent last week. The best was 70 percent, last reached in January 2000. The worst was 42 percent this Dec. 1 and March 14, 1993.
BUYING CLIMATE ??? Twenty-five percent say it's an excellent or good time to buy things; it was 24 percent last week. The best was 57 percent on Jan. 16, 2000. The worst was 18 percent this Oct. 19, Aug. 10 and Aug. 24.
METHODOLOGY ??? Interviews for the ABC News Consumer Comfort Index are reported in a four-week rolling average. This week's results are based on telephone interviews among a random national sample of 1,000 adults in the four weeks ending Dec. 28, 2008. The results have a 3-point error margin. Field work by ICR-International Communications Research of Media, Pa.
The index is derived by subtracting the negative response to each index question from the positive response to that question. The three resulting numbers are added and divided by three. The index can range from +100 (everyone positive on all three measures) to -100 (all negative on all three measures). The survey began in December 1985.