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Consumer Confidence and Income Growth Four of the five questions in the local consumer confidence index showed improvement over last year. Optimism about the national economy over the next 12 months rose 20 points. Forty-nine percent now expect good times in the U.S. in the coming year, compared to 29 percent in 1993. Positive views of the U.S. economy over the next five years increased 12 points. Forty-three percent now say they expect goodtimes, compared to 31 percent in 1993. Positive trends in personal finances today increased 10 points. Forty percent say they are better off now than last year, compared to 30 percent in 1993. The perception that now is a good time to make major purchases rose by 8 points. Sixty percent say now is favorable for buying big-ticket items, compared to 52 percent a year ago, putting this measure at its highest level since 1989. The only unchanged indicator is expectations for personal finances next year. Forty-two percent expect to be in better shape next year, about the same as in the previous two years. Taking all these responses together, the five-question Consumer Confidence Index in Orange County is now at 89. This is a 16-point increase from a year ago, and the highest score in the 1990s. Nationwide, the Consumer Confidence Index now stands at 92, according to the University of Michigan, indicating that the local economy continues to lag behind the national recovery. The local index is, of course, still well below the 100-plus readings that were commonplace in Orange County during the late 1980s. Still, this year's figures point to a dramatic turnaround from the "gloom and doom" mood of local consumers in recent years. The Consumer Confidence Index is calculated from a formula provided by the University of Michigan, which computes scores for each question (better - worse + 100), then adjusts by the 1966 base period. The national index score was 100 in 1966. This year, we again analyze the Orange County Consumer Confidence Index by demographic group. Residents aged 18 to 34 (94), people with annual household incomes of more than $50,000 (96) and those living in the South County (96) are more positive than both the county and national averages. The biggest increases in a year have been among 35- to 54-year-olds (68 to 89), residents earning over $50,000 (77 to 96) and those in the West (69 to 90) and South County (77 to 96). Median annual household income stands at $47,000, the same as last year. The Consumer Price Index in Southern California has shown very little inflation in the past year, so consumers here did not lose much ground. But the trend of no income growth is continuing throughout the 1990s, in stark contrast to the 1980s, and this is depressing the overall consumer mood even as perceptions of the national economy are improving. The South remains the county's most affluent region, with 64 percent of households making more than $50,000 a year and only 21 percent earning less than $36,000. The Central County continues to lag behind the other regions in household income, with 51 percent earning under $36,000 and only 30 percent with annual household incomes of $50,000 or more. In the North (39%) and West County(37%), about four in 10 households have incomes below $36,000, while four in 10 earn more than $50,000 a year. Chart 1: Trends in Consumer
Confidence - Household Finance (6K) |
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